FreeStar Technology Corporation (FSRT.OB) is poised to capitalize on the transformation sweeping the payment industry. FreeStar is one of the first companies to provide solutions and services that enable secure, real-time movement of financial transactions incorporating hardware and software to enable credit, debit and ATM cards with Pin transactions. FreeStar Technology is an international payment processing and technology company operating a robust Northern European BASE24 credit card processing platform based in Helsinki, Finland, which currently processes approximately 2 million card payments each month for an established client base that includes companies such as Finnair, Ikea and Stockman. The value of the transactions processed by FreeStar through its Finnish operation typically exceeds $200 million per fiscal quarter.

Beyond the scope of its established processing operations in Helsinki, Finland, FreeStar Technology is also focused on exploiting a first-to-market advantage of its Enhanced Transactional Secure Software (ETSS), which is a software package that empowers consumers to consummate e-commerce transactions with a high level of security using credit, debit, ATM (with PIN) or smart cards.

FreeStar Technology Corporation is developing a wide range of customer driven service programs that will increase the security of consumer related internet transactions, with the simple usage of hardware devices. Our solution works on most Windows-driven computers and will enable consumers to consummate secure e-commerce transactions over the Internet using credit, debit, ATM (with PIN) and smart cards. By enabling the use of ATM cards for Internet transactions, the consumer market for online merchants is dramatically increased and will allow cash-only industries to capitalize on the Internet for instant, low-cost transactions. FreeStar’s target markets also include cash-based industries such as gaming, securities, insurance, electronic bill payments and global money transfer.

The FreeStar Technology Corporation system integrates a consumer-side swipe terminal called the ePayPad with a back-end host-processing center. The swipe terminal encrypts sensitive financial data at the consumer’s personal computer before sending the data over the Internet to a secure third party processing center for decoding and subsequent forwarding of the credit, debit, ATM (with PIN) or smart card information (authorization code only) to the online e-merchant.

In addition to FreeStar’s powerful triple DES encryption algorithm that protects financial data when it is sent from the consumer’s terminal to the processing center, the merchant only receives the authorization number when a transaction is consummated, i.e. never receives or stores the consumer’s credit card information. This allows for the highest level of financial security in FreeStar transactions.

FreeStar Technology Corporation believes that its solution represents the future of secure Internet based commerce and is actively developing relationships with consumers and online businesses that will benefit from added security, increased sales volume and reduced charge backs.

FreeStar has recurring revenue streams from transaction and licensing agreements, low burn rate and ready to ship hardware and software solutions.

FreeStar has vertical market potential: e-commerce, securities industry, insurance and bill payment, and global money transfer.

The FreeStar system has easy, low cost integration into existing systems; complete compatibility with all banking systems and transactions cleared on ATM backbone.

FreeStar also operates full online connectivity to all Finnish banks, including Nordea, Sampo, Oko, the savings and loans (Aktia, etc.) and Luottokunta, the Finnish bank-owned & operated credit card company.

Identity theft was the top US consumer fraud complaint of 2001, according to a US government agency. The Federal Trade Commission (FTC) figures show that identity crimes accounted for 40 per cent of all grievances. Although instances can result from the theft of personal belongings, the apparent rise is often attributed to Internet security breaches. In some cases, hackers have been able to penetrate big corporations' databases to download credit card numbers and other data. FreeStar's PaySafeNow system protects the consumer’s identity and financial information and is therefore an ideal solution for United States consumers concerned with the above issues.

Approximately 68 million working Americans are currently deemed non-creditworthy and are unable to obtain credit cards. FreeStar’s PaySafeNow system will allow these consumers to conduct cash transactions over the Internet, opening a whole new market and increased client base for merchants and financial institutions alike.

The good news regarding worldwide e-commerce is that the market is expected to grow to an annual volume of US$4.3 trillion by 2004, according to Business Communications. Meanwhile, the average annual e-commerce expenditure per household is expected to increase from US$801 in 1999 to US$3,577 in 2004.

Gartner Group estimates that e-merchants lost an estimated US$1bn to fraud and chargebacks in 1999, roughly 5 per cent of online sales. This is a far cry from the one-tenth of 1 per cent fraud rate suffered by brick-and-mortar merchants. FreeStar’s PaySafeNow system is ideally positioned to help merchants and financial institutions counteract fraud, thus increasing revenues.

Disturbingly, figures show that credit card fraud in the UK alone totals US$453m about 50 per cent of the EU total according to VISA. Having recently opened offices in Dublin, Ireland, FreeStar will be entering the European market place with a population of over 400million people. The issuance of the new EURO currency into nine countries will make economic conditions more favorable for FreeStar to launch its products.

Latin America as a technology market with its close proximity to the United States also has a healthy outlook. The IT and telecommunications services markets are expected to see continued growth that outpaces the worldwide average and additional factors could emerge to add even more momentum. As Latin America has evolved beyond its historical 2–5% share of the worldwide market, FreeStar concluded that the time was right to capitalize on the region’s current and emerging growth. FreeStar is now beginning to reap the rewards of its strategy with the announcement of its first revenues from its Latin American operations. FreeStar is confident that that its alliances with Banco Nacional de Credito, Visanet and Cardnet will fuel exponential revenue growth in the Latin American and Caribbean regions.

The flexibility of FreeStar’s PaySafeNow system has created massive opportunities the company. Not only can it be used by the home user and as a point of sale unit by brick and mortar establishments, it can also be deployed as a money transfer unit. The highly lucrative money transfer market offers FreeStar the opportunity to establish operations not only in North America and Europe but also in Asia beyond.

According to the 2000 US Census, approximately 5% of the current US population (some 14.4 million people) originally come from Latin American and Caribbean countries (LAC). These workers typically send home an average remittance of $250 eight to ten times a year. For the LAC region, this flow reached an estimated $20 billion for the year 2000. Not only does this represent a significant flow of funds, it but also involves some 80 million separate transactions annually.

The European Union draws labour from Eastern Europe and Latin America. Latin Americans make up approximately 18% of the registered foreigners in Spain and close to 10% in Italy. Japan is currently experiencing a “return migration” of a quarter million temporary workers from Brazil, mostly the direct descendants of Japanese migrants who went to Brazil during the first half of the 20th century.

The outlook for remittance flows to Latin America and the Caribbean in the upcoming years is striking. If immigration patterns and the economic needs of receiving countries continue at current levels, the importance of remittances to the region will keep growing significantly. At current growth rates, cumulative remittances to Latin America and the Caribbean for the coming decade (2001-2010) will reach more than $300 billion. FreeStar is well positioned to receive substantial transactional revenue and product sales from this lucrative market.