Morpho’s Growth Strategy

The worldwide security markets – covering people and property – are expanding fast and Safran’s development strategy in this area has put it in a position to harness that growth over the long term. Morpho Chairman & CEO Jean-Paul Jainsky told us more.

Q: Morpho’s growth has been picking up pace for several years now. What are the main drivers?

We have been seeing healthy organic growth rates for the past four years now, but especially exciting external growth via Safran’s investments in security businesses. The Group has invested over €1.7 bn to take over several companies – Sdu-Identification, Printrak, GE Homeland Protection and L-1 Identity Solutions – since 2008. Safran has also recently bought back GE’s 19% stake in Morpho Detection. These external growth operations have cemented our leadership in the markets for biometric identity solutions and ID documents, and opened up the detection market. Morpho is currently the only industrial firm that can meet every airport security requirement – explosive detection, personal identification, securing travel documents, securing border controls and controlling access to restricted areas. In other words, our company is in a prime position to ride growth in worldwide security markets, and those markets have been growing at a considerable and constant pace for years.

Q: What is driving that strong demand and how is it fuelling Morpho’s business?

The growth in these markets stems from three structural factors that have combined in our environment.
First of all, threats have been evolving non-stop, especially in air transport, triggering strong demand for solutions to improve security and ease swelling flows of passengers and products. This involves using biometric passports almost systematically around the globe, setting up automatic border identity checks, and honing sophisticated, ironclad solutions to inspect travelers and their luggage while keeping flows moving.

Then, demand from emerging countries that want to build up their registries and issue secure ID documents for their citizens is on a sharp upward trend. Their goal is to cover their sovereign requirements as regards State services for their people (with passports, ID cards and driver’s licenses), provide welfare benefits (with social security, pension and allowance cards), and strengthen democracy (with voter’s cards). These markets are opening up big opportunities for all our ranges of systems, terminals and documents.

Lastly the rapid growth in paperless transactions, and therefore identity fraud, is spurring more demand for powerful authentication solutions (digital identity). This means governments and businesses need reliable biometric data acquisition capabilities, and need to issue secure documents (such as EMV* standard smart cards or health cards). And this is opening up new outlets for biometry, for example in banks. The smartphone and mobile Internet boom is also generating demand for new authentication solutions and e-services, which are in turn opening up growth opportunities for Morpho.

Q: Morpho is also stretching its presence worldwide – in South America, the USA, India and Europe. Tell us more about that development strategy.

We have built our worldwide development strategy around two goals: we want to market our products on international markets and set up a local presence for our customers who entrust us with sensitive sovereign data. In 2011, for example, we bought Carvajal bank card customization and production centers in Colombia and Peru. This move stepped up our regional presence and put us in a position to meet demand in the South American banking market. We have also recently opened a subsidiary in Chile, after securing a major contract to produce electronic passports and ID cards there.

Q: Morpho is the worldwide leader on several of its markets today. But in which markets do you still need to grow and gain market share?

Morpho is the worldwide leader on markets for solutions that enable biometric identification and tomography systems to detect explosives in checked luggage, and a key player in the smart-card sector. To hold on to our leadership, our technology needs to evolve at the same pace as these dynamic markets. We will continue to enhance our technology range to address new requirements stemming from new developments such as e-services, digital identity and cloud computing (data storage and processing on remote servers). Our heavy investment in R&D (8% of our annual revenue) and targeted acquisitions such as Cassis International, a trusted service provider, show that we are serious about this.

Notes:

*EMV (Europay Mastercard Visa) has been the standard for chip-based credit and debit card security since 1995.