10 factors shaping the identity verification industry in 2020
The identity verification industry is expected to grow steadily during the forecast period, reaching USD 18.12 billion by 2027. But it is not all roses, there are some alarming factors behind the phenomenal growth of the industry.
2019 was a rollercoaster ride for decades-old identity verification industry. The regulations changed, technology evolved and equally exploited by legal and criminal entities, global economies joined forces to fight money laundering and several other trends and incidents shaped the 2020 identity verification industry.
The new decade is about to hatch and its high time industry stakeholders realize the significance of this shift in the industry. Because this shift is beyond the growth of revenues generated by companies, it is about the approach of global entities towards identities. The UN and World Bank ID4D initiatives set a goal for providing everyone on the planet with a legal identity by 2030.
5+ factors that are shaping the new decade of digital identity verification
1. More stringent regulations
The regulatory authorities are becoming more stringent towards KYC and AML compliance among reporting entities. The global authorities are always in a bid to control the increasing financial crime, which is disastrous for the financial infrastructure.
FATF increased the scope of reporting entities and recommended the member countries to oblige the legal professionals, art dealers, and virtual asset dealers to perform AML screening on their customers. The AML screening regulations implemented in these sectors are parallel to those implemented on financial institutions.
The EU launched the fifth AML directive which is set to be fully implemented from 10 January 2020. The identity verification threshold for the prepaid card industry is reduced from EUR 250 to EUR 150. Also, the scope of AML regulations is further enhanced.
The U.S treasury expanded its counter-terrorism powers and now targets the international financial institutions around the world that aid the terrorist groups working in the U.S. Also it added three Korean groups, namely, Bluenoroff, Lazarus Group, and Andriel into sanctions lists.
Read this blog – KYC 2020-how 2019 changed the landscape of global regimes – to know more about regulatory shift in 2019.
2. FATF’s digital ID systems guide
The FATF is a global regulatory authority that gives AML and CFT (Counter Financing of Terrorism) recommendations to the member countries. FATF issued the first draft of the digital ID systems guide in 2019 and requested recommendations from stakeholders such as government bodies, consumers, identity verification companies, etc.
This is a historical shift in the evolution of the identity verification industry. Once the complete guide is launched, companies offering competent services will gain more customer value and acclaim from the businesses.
3. The silver lining of technological shift
The previous decade was the era of remarkable technological shift at a global level. Huge advancements in artificial intelligence and biometrics were witnessed that changed the way technology was used. Every cloud has a silver lining, the shift in technology was equally utilized by legitimate entities and criminals.
Deepfakes raised havoc in 2019. As per a study, 14, 678 deep fakes are available online. Deep fakes are the manipulated form of truth where criminals use artificial neural networks to edit the video or audio of a person.
A UK-based firm was tricked to transfer $243,000 through employing deep fake. Also, the political scandals like that of Nancy Pelosi raised havoc in the global political community. Both these were voice phishing deep fake scams where the audio was manipulated to remould the truth.
4. Increase in frauds
49% of organizations globally said they’ve been a victim of fraud and economic crime in 2018 (PwC’s 2018 Global Economic Crime and Fraud Survey). The businesses are concerned about approaching financial losses due to an alarming increase in cybercrime and financial crime. This concern is often addressed by practising more rigorous due diligence measures on the stakeholders of the business entities. Hence it leads to more dependence on KYC and AML screening solutions. As digital identity screening solutions are a cost-effective and futuristic approach to fraud-detection, this leads to the global growth of the identity verification industry.
5. Money Laundering and terrorist financing a two-edged sword
Money laundering and terrorist financing are global disasters in influencing economies. The united nations office for drug control found that the annually laundered amount globally is equal to 2 – 5% of global GDP. quite surprisingly this laundered amount is not the loss of the governments entirely, but the businesses exploited for a smooth transfer of money are also used for this purpose. Hence businesses are investing more in compliance and technical solutions for AML screening of their prospects.
6. Increasing identity theft is the tip of an iceberg
As per a report of Insurance Information Institute (III), 14.4 million identities were stolen in 2018 and 3.3 million victims were liable for some sort of financial penalty. But this is just the beginning of an array of consecutive crimes conducted with these stolen identities. These stolen identities are used for money laundering, credit card fraud, new account fraud(with banks), account takeover fraud, mortgage frauds, etc.
The same report found that the majority of the stolen identity was used to defraud businesses and financial institutions. More than 40% of the stolen identities were used for the execution of credit card fraud.
7. Technological advancements
The world is already moving towards reinforcement learning. These changes are motivating businesses to invest in technical substitutes for hefty compliance procedures. More and more businesses are investing in next-generation identity verification solutions backed by AI and powered with biometric technology. A study by spice works found that 90% of businesses will be using biometric technology by the year 2020.
Also, digital identities are becoming a household term. Goode intelligence trend report predicted that more than 3 billion digital identities will be distributed by 2025.
8. Customers are becoming smarter
One survey conducted by Visa found that 86% of consumers actually want to use biometrics to verify their identity, as opposed to traditional passwords. Digital identity verification solutions prove to be a competitive edge where customers are willing to onboard platforms with visible security measures. But too many security measures especially manual verifications annoy customers and they are most likely to abandon the cart.
9. Increasing pressure on customer rights
California Consumer Privacy Act (CCPA) was launched in the U.S that gave an upper hand to the consumers in dealing with their data. The Californian consumers have the right to request access and deletion of their data.
The CCPA is called GDPR lite due to strict data protection regulations. GDPR and CCPA are implemented on global businesses operating in their area of influence. So it has a global impact and digital identity screening solutions compliant with data protection regulations share the burden of reporting entities.
10. Identity verification is winning over manual verification
The primary reason behind the growth of this industry is the next-generation solutions that it delivers for KYC and AML screening of customers. Highly accurate results are delivered in real-time and proof of verification is also provided. As the identity verification industry helps businesses experience global scope in the verification of their customers. So it proves to be a reliable friend, by all means, hence businesses choose digital identity screening solutions over traditional verification methods.
Shufti Pro 2020
2019 was a very rewarding year for Shufti Pro. It untapped new ventures in enhancing the solutions and overall experience of the customers and end-users. Below are some significant achievements of Shufti Pro in 2019, that helped the company enter the new decade ready for the upcoming challenges and opportunities.
Shufti Pro enhanced the identity verification solutions and decreased the average time of verification from 30-60 seconds to 15 t0 30 seconds average time for verification.
A new office is opened in Dubai to expand the scope of the company.
New services of KYB(Know Your Business) and AML for businesses are launched in 2019.