In this second part we will outline those tools that preponderantly focus on identity verification, authentication solutions, (behavioural) biometrics, and customer onboarding/KYC.
Digital transformation has opened the door to lots of opportunities for the banking and financial institutions ecosystem: one can only list consumers’ possibility to access banking services via their mobile devices, the use a selfie to open an account, consumers’ ability to get into interactions with chatbots, money transfers in real time, splitting the bills, or even receiving digital receipts, and many more.
However, all these leave room for risks and fraud exposure for users and businesses, as digital transactions come hand in hand with online fraud, especially in a pandemic environment, when COVID-19, the lockdown, and the transition to remote working have caused global panic, financial stress, and business instability. Thus, the surge in internet traffic and online transactions, as well as the use of digital channels have created the perfect ground for fraudulent activities. Financial criminals have demonstrated they are quickly adapting to all the industry changes, taking advantage of every crack that could lead to new scams or hybrids of already existing ones, such as synthetic identity fraud, bot attacks, social engineering, impersonating scams, identity theft etc.
Building defences to secure digital identities and compliance
As a result, in order to prevent financial crime, organisations need to find the most appropriate ways for their businesses to verify customers’ identities without rejecting the legit ones, complete the necessary customer due diligence checks or protect sensitive data. So, we will further see some of the most important deals and acquisitions that aim not only to protect the digital presence from emerging threats, but also to establish trust and frictionless customer experiences, while remaining compliant with regulations. We will address three perspectives: consolidation of the businesses’ position in the industry, creation of new capabilities, and expansion into new markets.
Expanding digital ID solutions around the world
Equifax, a multinational consumer credit reporting agency helping financial institutions, retailers, insurance firms, healthcare providers, banks, credit unions, and government agencies make critical decisions, signed its biggest acquisition – a USD 1.825 billion deal – with Appriss Insights, an information technology company that provides customised solutions to enhance security and financial processes for businesses. The benefits are numerous for Equifax: expansion of the company's Workforce Solutions verification capabilities, enhancement of identity and fraud prevention offerings, advancement of the strategy for a comprehensive data hub, and expansion of Equifax relationships with employers, background screeners, and state and federal government agencies. Thus, the company will emerge into the USD 5 billion US talent acquisition market and USD 2 billion US government social services delivery market.
Equifax also entered into a definitive agreement to acquire Kount, a provider of AI-driven fraud prevention and digital identity solutions, with a deal sealed for USD 640 million. If we think of the benefits of this acquisition, we can mention that Kount’s AI from its Identity Trust Global Network – a risk-based authentication platform – links trust and fraud data signals from 32 billion digital interactions, 17 billion devices, and five billion annual transactions across the world. This means that Equifax will be enabled to expand its worldwide footprint in digital identity and fraud prevention solutions.
Norway-based digital identity company Signicat embarked on a major acquisition made in 2021, buying Spain-based Electronic IDentification (eID), a digital identity pioneer and provider of asynchronous video identification services. The scope of this move has two reasons: firstly, expanding its reach into more European and Spanish-speaking markets, and secondly consolidating and strengthening its identity proofing and electronic signing offerings.
Lastly, in August, Signicat acquired Dokobit, a Qualified Trust Service Providers (QTSP) on the EU Trust List, which ensures strict assurance for validation of electronic signatures. As Dokobit offers businesses cross-border signing capabilities, being used by companies including SEB, Luminor, Telia, Toyota, CreditInfo, and others, the acquisition further expands Signicat’s market reach into the Baltic countries, helping it propel into Eastern European markets. Now, businesses and the public sector are offered more SaaS solutions for electronic authentication, signing, sealing, and validation processes.
Investing in new platforms and creating stronger identity capabilities
With global trends including cloud and hybrid IT, digital changes, and zero-trust security, companies had to quickly pivot to offer engaging customer experiences online, and to do so, investing in identity platforms became crucial. Understanding this, Okta, an independent identity provider, signed an agreement to acquire Auth0, an identity platform for application teams. The stock transaction is valued at approximately USD 6.5 billion. While Auth0 will operate as an independent business unit inside of Okta, the deal aims to accelerate Okta’s growth in the identity market.
IDnow, an identity verification-as-a-service solution, agreed to acquire ARIADNEXT, a company specialising in remote identity verification and digital identity creation, for a total of USD 59 million. Together, the companies can now provide an identity verification platform, ranging from AI-driven to human-assisted tech and from online to point-of-sale verification options. In addition, IDnow consolidates and increases its offers to the UK, French, German markets, and to international customers with identity verification needs.
In June 2021, Mastercard completed the acquisition of Ekata, which is a provider of identity verification services. With a deal that cost USD 850 million, Mastercard aims to bring together both companies’ teams to advance their capabilities to create a seamless way for consumers to prove their identity in today’s digital economy. This move is a step further to create trust in a digital world; after all, trust is the main factor in conducting digital commerce.
US-based trusted identity platform Acuant completed the acquisition of UK-based identity verification and KYC solutions provider Hello Soda, which will bring its expertise in e-money and gaming, with customers including VirginBet, Klarna, and Paysafe. This move will combine the companies’ technology and data science capabilities, aiming to unlock trust in digital identities.
Digital authentication and behavioural biometrics services
In another round of investment, Signicat revealed the acquisition of the in-app authentication solution provider Encap Security. The two companies have a prior connection, as they have worked together for over 10 years. As such, Signicat’s expertise in digital identity, onboarding, and signing is combined with Encap’s experience in authentication solutions, creating the technology required by regulated businesses to verify, onboard, and authenticate across the entire customer lifecycle, all being compliant with the PSD2 SCA demands.
Another important acquisition in this space is the deal signed by Ping Identity, an Intelligent Identity solution for the enterprise, with SecuredTouch, an expert in behavioural biometrics for digital transactions, delivering continuous authentication technologies to strengthen security and reduce fraud while improving customers digital experience. The benefits of this acquisition include advanced signals, data, and intelligence from which enterprise customers could gain understanding of fraudster behaviour and increase authentication services to stop malicious activities and reduce fraud loss.
Stripe, a US-based fintech, acquired Bouncer, a card authentication technology company, whose card scanning and risk techs help online businesses reduce fraud and authenticate cards. Bouncer will be integrated into Stripe Radar, a fraud prevention tool that uses its ML models, trained on purchases made at millions of companies around the world. As regards how this solution will work, once a specific transaction is identified as high risk, Radar will use Bouncer’s verification tech to confirm that an end customer has a legitimate card in their hands at the time of the purchase. In a time when fraud has increased in sophistication, this extra layer of protection might reduce false positives for potentially high-risk transactions.
If we are to dive deeper into the idea of global digital transformation, we must point out Trust Stamp’s acquisition of PixelPin. The former is a provider of AI-powered identity services; the latter – a company focused on image-based authentication, offering a personal means of logging into online accounts. Combining the two companies’ capabilities can only lead to broadening the scope of internal risk-management strategies, while providing additional options for multi-factor authentication. 2021 proved to be a fruitful year for Trust Stamp, as this acquisition follows a series of milestones for the company, among which we can reckon their admission to the OTCQX Best Market, leadership team expansion, and the launch of a USD 5 million round of funding.
The American market put another pin on the map with Prove’s announcement to acquire UnifyID, a mobile-based passive authentication and behavioural biometrics company. The US-based identity verification solutions provider will benefit from UnifyID’s solutions, not only because UnifyID is backed by investors such as New Enterprise Associates, Andreessen Horowitz, and Stanford University’s StartX, but also because its tech will allow the boost of current two-factor and multi-factor authentication strategies, reduce reliance on one-time passcodes, enable passwordless login experiences, facilitate contact centre and chat interactions, thwart promotions fraud, and comply with the EU’s PSD2 and SCA mandates.
A major deal was signed between cloud-based financial risk management platform Feedzai and the behavioural biometric platform Revelock, formerly known as Buguroo. Following a USD 200 million investment round earlier in 2021, Feedzai has big plans, as the company wants to create an AI-powered risk management platform with native, integrated behavioural biometrics, that will allow FIs and merchants to detect crime before it occurs. The companies want to create a large Financial Intelligence Network (FIN) – a vault of over a trillion data points, sessions, and profiles of good and bad actors –, and the end-result has a high chance of success, if we consider that Revelock provides Feedzai with a digital identity solution using behavioural analytics powered by deep learning, which makes Feedzai’s platform an end-to-end risk management platform for prevention, detection, remediation, and compliance that will minimise the burden on AML teams.
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The unprecedented times we are living in created by the pandemic resulted in the enforcement of stricter regulations and the constant pressure on businesses to improve their compliance systems. This led to the businesses’ need to integrate new digital solutions that stay compliant with the law, enhance capital, and reduce operating costs.
New compliant financial crime solutions
In May 2021, global private equity firm Astorg and international alternative asset fund management group Bridgepoint expressed their decision to sign an agreement to acquire Fenergo, a provider of KYC and Client Lifecycle Management (CLM) software solutions. If we consider Fenergo’s market position, its innovative technology, and the fact that the company follows a period of strong expansion – its revenue increased by 17% to USD 107 million in the financial year ending March 2021– the company likely has strong potential to drive further investment in the SaaS strategy and product line development in the regulated FI sector.
Data analytics provider LexisNexis Risk Solutions, and Accuity, which powers compliant client transactions to help build an interconnected financial ecosystem, announced they are merging operations. The goal is to offer customers control risk, enhance compliance, and optimise business processes.
LexisNexis also continued its round of acquisitions in the financial crime space with a deal signed in August to buy TruNarrative, a cloud-based orchestration platform, delivering unified decisioning across identity verification, fraud, eKYC, AML, and account monitoring through a single API. Via the agreement, which allows regulated organisations to orchestrate their end-to-end compliance obligations, meeting onboarding and transaction monitoring requirements with lower customer friction, TruNarrative will become a part of the Business Services Group of LexisNexis Risk Solutions; together aiming to help businesses select the financial crime prevention components they need, while enabling these tools within high functioning, easy-to-use workflows.
The bottom line
While merchants adapt to the new digital-payments challenges, and consumers get more comfortable with surfing the digital world, fraudsters are adapting just as easy at finding methods to take advantage of these online trends. The consequences have a snowball effect: when businesses fall victim to a fraud attack, customers receive poor experiences, which results in the loss of consumer trust, brand loyalty, and finally, revenue.
Nowadays’ rapid growth of fraud rates must not come as a shock, considering all the above. Businesses should expect to see more criminal activity evolving over the next years. One solution for organisations to both protect themselves and their customers is to stay vigilant regarding the current and emerging fraud trends, while solution providers need to constantly innovate their offering and their protection packages to offer the most efficient solutions.
In addition, to flatten the curve and bring down any fraudulent activity, collaboration is key. Throughout 2021, we have seen big moves in the cybersecurity space, with companies like Sysnet, Imperva or Atos that covered all fronts by signing strategic agreements to stay resilient in front of cyberattacks. Also, both Sift and Nasdaq understood the need to consolidate new features to stay ahead of their competitors and fraudsters, and, as a result, combining capabilities to create new fraud platforms and tools has proven to be a great strategy. On the other hand, the digital identity space revealed huge investments from Equifax and Signicat, which plunged into the journey to conquer new markets and accelerate their growth. We have companies like Ping Identity, Acuant, or LexisNexis that have joint forces with other big names to stop malicious activity.
So, what can we conclude after all of this? Fighting fraud and cybercrime is not an easy task; fraudsters are gazing at any vulnerabilities, but as long as companies understand that collaboration means being stronger and big moves keep happening in the industry, things are going for the better. Let’s continue to watch the M&A space in fraud prevention.
About Simona Negru
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