Identity Verification Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

Identity Verification Market - Growth, Trends, Covid-19 Impact, and Forecasts (2023 - 2028)

The Global Identification Verification market was valued at USD 8.92 billion in 2021 and is expected to reach USD 18.49 billion in 2027, registering a CAGR of 12.62% over the forecast period (2022 - 2027). The primary drivers for the identity verification market are stringent regulations and the need for compliance. Consumers are highly dependent on the government for the protection of their data. In response, the government has introduced a stream of regulations that focus on reducing fraudulent activities and are introduced by government bodies across the globe. Identity verification is one of the central ideas of such stringent regulations.

• The market for identity verification is expected to grow over the forecast period due to some imperative factors, such as adopting solutions through stringent regulations and the need for compliance. The regulatory authorities have become stricter toward the compliance of KYC (know your customer) and AML (anti-money laundering) among reporting entities.
• The European Union launched the fifth AML directive (AML5), under which the identity verification threshold for the prepaid card industry was reduced from EUR 250 to EUR 150. All member states implemented the directive in January 2020. The AML5 regulations focus on transforming KYC processes to comply with the standards and procedures proposed by AML and eIDAS rules and establish guidelines for verifying customers at a high-security standard.
• Moreover, government bodies worldwide focus on creating stringent regulations to curb identity theft and get the global population under the legal identity umbrella. The United Nations and World Bank ID4D initiatives aim to provide everyone with a legal identity by 2030. Also, In the modern world, e-governance is a new notion that both developed and emerging countries are adopting. In the past ten years, the number of government entities using remote ID verification for social security cards, licenses, and many other documents has multiplied.
• Additionally, the growing number of financial frauds in businesses is influencing the rise of identity verification solutions for businesses. According to the Verizon Data Breach Investigation report 2022, the company noted 5,212 confirmed data breaches amongst 23,896 incidents. The report has outlined the impact of the infrastructure and attack surface as significant contributors to the risk. Further, the report highlighted that identity theft and fraud had been the basis of transactional cybercrime.
• A study commissioned by the digital ID verification service provider Jumio which interviewed 8,000 adult consumers between April 7thand 14th, 2022, suggested that 80% of consumers prefer transacting with brands that perform digital identity verification. Further, 92% of consumers in Mexico, 89% of Singapore consumers, 74% of the US consumers, and 66% of the United Kingdom consumers said they were more likely to engage with brands with robust ID verification measures.

• Banks and financial service providers, including pension and insurance providers, have a strict identity and personal data requirements, often known as Know Your Customer (KYC). For opening a bank account, switching accounts, taking out life insurance, or accessing pension records, several such attributes must be gathered and verified as part of a firm's risk-based assessment and legal obligations.
• For instance, to meet the National Automated Clearing House Association (NACHA) standards for allowing anti-fraud safeguards, the US-based financial services company, SWBC, teamed up with Fincity in January 2021. Additionally, it accessed Fincity Pay's open banking features, allowing it to validate ACH payments rapidly.
• In June 2021, Simple Nexus, a platform for loan officers, borrowers, and settlement companies, combined with Fincity's MVS, the company's mortgage verification service. Through a single embedded service, this invention will simplify the verification of an applicant's income and assets.
• Financial data is some of the most sensitive information stored over the internet, and online identity fraud is estimated to cost over a trillion USD yearly. Owing to this, banks are investing heavily in authentication solutions, spending over USD 1 billion a year, representing approximately 30% of the total security budget of banks. Easy account setup and KYC are the primary reasons customers adopt FinTech solutions.
• The growing collaborations in the financial sector further boost the market growth rate. For instance, in February 2022, FYNXT, a global FinTech organization that provides digital solutions, announced the integration of Shufti Pro, an AI-powered identity verification service provider, into its client manager and client portal. Brokers using FYNXT's platform can access Shufti Pro IDV services without leaving the platform. FYNXT is a financial technology platform that offers payment solutions for Forex, remittance, wealth management, and multi-asset management that are simple, cost-effective, and transparent.
• In February 2022, Onfido, a global identity verification and authentication company, stated that it had set 2021 as a breakthrough year. The company's revenue increased by 90% Y-o-Y to over USD 100 million, including a 134% increase in United States. To meet the growing demand for Onfido's verification and authentication services, the company increased its workforce while also investing in R&D, advanced AI-powered fraudulent detection capabilities, and customer success for organizations worldwide.

• The major factors driving the identity verification market in the Asia-Pacific include increased digitization initiatives, increased fraudulent activities and identity theft over the last decade, and advanced digital identity use cases across verticals. Furthermore, initiatives by governments and businesses focusing on digitalization and the implementation of new technologies, such as AI, ML, and automation in identity verification solutions, would present lucrative opportunities for identity verification vendors.
• A fragmented regulatory environment and the rapid transition to digital commerce have spurred several enterprise fraud management (EFM) trends in Asia-Pacific.
• The significant contribution of COVID-19 is the shift of work culture from manual to automated; there was an increasing number of online activities, which has raised the considerable number of online registrations and profile identification, due to which the risk of fraud has increased; thus the demand for the id verification is also growing.
• Additionally, synthetic identity fraud is a growing trend. About 61% of merchants in APAC reported higher rates of such fraud, which is the most among all regions globally. Around 84% of merchants in APAC lost revenue due to payment fraud; in Singapore, this is slightly higher, with nine in 10 merchants reporting losses 57% of merchants in APAC said substantial impacts in costs for remediation of payment fraud victims in 2020.
• In 2021, a Norton cyber safety insights report published that over 27 million Indian adults experienced identity theft in the last few months. The information also published around 1.3 billion hours spent to resolve the issues. Per the survey of 1,000 respondents in the country, 36% of Indian adults detected unauthorized access to the account or device.

The Identity Verification Market is highly fragmented, with numerous competitors and many competing technologies that provide intense rivalry among the players. Moving forward, acquisitions and collaborations of large companies with startups are expected, focusing on innovation. Some of the key developments in the area are:

• March 2022 - NDID, Thailand’s national digital identity platform for financial institutions and a private company, announced that following a successful Phase 1 of verifying natural persons, it would move on to verifying legal persons beginning in 2022, as well as ascertaining foreign identities. The NDID has also partnered with Mastercard’s digital identity scheme for international connectivity.
• March 2022 - Onfido announced the expansion of its Real Identity Platform, improving fraud accuracy by 54% and fully automated performance by 12x. The platform simplifies identity for everyone. Customers can reduce the complexity of sourcing and managing multiple identity verification vendors to meet local compliance regulations and more easily mitigate fraud threats in a growing global marketplace.

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