Serial entrepreneur Shlomo Kramer has made a lot of money. Check Point Software Technologies Ltd. (Nasdaq: CHKP) is the company most associated with him, and there is also the recent success of Imperva Inc. (NYSE: IMPV), which has a current market cap of $700 million a year after its IPO.
Kramer's next bonanza may come from protection against hackers who attack customers' bank accounts. The new company is Trusteer Inc., founded six years ago, and which is now run by CEO Mickey Boodaei. It has raised just $10 million in two financing rounds from Kramer and US Venture Partners.
Trusteer's numbers are impressive: it will reportedly have up to $80 million revenue in 2012, 70% more than in 2011. At this growth rate, its revenue will top $100 million in 2013. It has been profitable for several years, and it is now planning its next step: an IPO within 18 months.
Various sources talk about a company value of hundreds of millions of dollars for Trusteer in the event of an IPO, assuming its current growth rate continues.
Doubling the workforce
Trusteer's workforce is also growing. It began the year with 100 employees, and its workforce has since expanded to 180 employees, of whom 120 are in Israel, working in R&D and marketing. The company is still hiring, and it plans to cross the 200-employee threshold by the end of the year, doubling its workforce in a space of 12 months.
Trusteer mostly operates in the US and UK, and it plans to expand to other countries, including Argentina, Brazil, Mexico, Italy, the Netherlands, and possibly Japan. The company is riding the wave on online bank fraud. Banks worldwide are facing a problem: they have protected themselves and their customers against viruses, but have failed in coping with viruses that attack their customers' computers to gain access to bank accounts online.
Hackers have realized that it's easier to plant a virus on a customer's computer than a bank computer, which has more protective layers. Hackers gain access to bank customers' accounts by first offering them a link to a fake website, which if a customer visits, results in the implanting of a virus.
"5% of bank customers are infected with these viruses," says Trusteer VP marketing Yishay Yovel. He says that business customers are as exposed to these viruses as much as private customers, and because business customers have bigger bank accounts, the damage they incur is greater.
Viruses that sit on the computer are called "man in the browser", which intervene between a customer and his bank account obtaining information about the customer and the account. The viruses sometimes ask for a customer's details by impersonating a bank questionnaire. "The screen looks like a standard bank questionnaire for customer identification. The screen is designed like the bank's screen, and it is impossible to spot that the screen is fake and actually part of the virus," says Yuval. When the customer fills out the questionnaire, the virus collects the data and uses them to impersonate the customer to carry out transactions online or via the bank's call center.
Yuval says that these are sophisticated viruses. Their operators usually keep a low profile to avoid getting caught. The thefts are usually in small amounts, to prevent the customer from discovering them. The viruses can show the customer a fake screen of his bank account which does not include the thefts, and the customer does not realize that his balance is less than it should be.
Bank fraud of this kind is estimate at $1 billion a year, more than bank robberies at branches. Some sources estimate that the fraud is actually larger, because some cases are not reported. Yuval says that even though the bank is not responsible for the infection of the customer's computer, many banks prefer to reimburse customers the stolen money in order to avoid damage to the banks' image from publication about the hacking.
"Globes": What kind of hackers do you deal with?
Yuval: "Mostly Russian gangs, which use technology servers to attack Western banking systems."
What about Israel?
"We are currently unaware of any such virus in Israel, because it doesn’t pay for the hackers to create a platform in Hebrew to imitate a bank's website, in view of the effort needed compared with size of the Israeli market. Hackers mostly prefer to work against English-speaking countries. However, every time they see that a particular market is defended, the fraud moves to a less protected market. So theoretically, they could reach Israel in the future."
Trusteer uses cloud computing to offer anti-hacking solutions. One of its solutions is software that customers install in their systems to search and destroy website imitating viruses. The main advantage of the company's solution is it can evolve in line with the virus's evolution. In other words, if the virus changes its shape in the UK, Trusteer spots this and can destroy the evolved virus in other countries, rendering the particular virus useless.
Trusteer recently developed a new product, which sits on a bank's servers and spots a virus entering a user's computer. Upon identification of the virus, the bank calls the customer to verify that the transaction is genuine, and if necessary, offers the customer the original software.
What's your edge compared with your competitors?
"Our competitors mostly offer products that identify unusual transactions in customers' accounts. In contrast, we liquidate the virus before it begins to act, without disturbing the user."
Trusteer has more than 200 bank customers in the US alone, including five of the country's top ten banks. Worldwide, customers include HSBC Holding plc (LSE: HSBA; HKSE: 005; NYSE, Paris: HBC), Royal Bank of Canada Inc. (NYSE; TSX: RY), and Lloyds Banking Group plc (LSE: LLOY; NYSE: LYG). Trusteer's solutions are used by more than 30 million end-users. A bank pays the company $1-10 per year, on the basis of the number of customers who have downloaded the software per customer, depending on the type of customer.
Yuval says that banks which have used Trusteer's product have reduced hacking of their customers to almost zero, and that 100% of customers renew their contract with Trusteer every year. The annual renewals and very high renewal rate imply that the company's revenue in 2012 will be around the same amount as in 2011, not taking new customers into account.
Published by Globes [online], Israel business news - www.globes-online.com - on November 18, 2012
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