The marketplace economy — name a vertical within that space, whether it’s ride-hailing, project design or eCommerce — is growing by leaps and bounds, crossing borders and (at times) regulatory jurisdictions. To gain critical mass, online marketplaces that are just starting out need to onboard as many customers and suppliers as possible to ignite. However, the two sides of any given transaction may never see one another, so trust is crucial.
To take a phrase from the journalist’s handbook: Trust, but verify. To be exact, verify digitally.
To that end, Passbase, a digital identity (ID) startup based in London, has focused on serving as “the Stripe of user identification,” as noted in an analogy by Co-founder and COO Dave McGibbon during an interview with Karen Webster.
Passbase said earlier this month that it had raised pre-Seed and Seed funding in the amount of £530,000 (nearly $693,000 USD) from a consortium of investors, such as Alphabet, Kleiner Perkins and EY. The funding comes as smaller firms that join online marketplaces — some of them startups themselves — face challenges in onboarding far-flung customers and suppliers.
The goals of any digital identity verification process or technology include stopping fraud in its tracks, preventing fake accounts from ever being opened and, at the most basic level, maintaining (and even building) a client’s reputation for trustworthiness. On the consumer side, a digital identity solution would ideally let the individual maintain ownership of their information, and — in the age of GDPR and PSD2 — control the ways (and even when) firms have access to that information.
That’s not easy. Consider the ride-hailing firm that needs to verify the credentials of a would-be driver (in another country) before adding them to the roster. All manner of data must be verified, ranging from valid licenses and insurance to criminal histories and bank accounts.
McGibbon said outsourcing risk management and compliance in a plug-and-play, gateway model — that leverages the video selfie, facial recognition and government-issued IDs to verify users — could help small businesses (SMBs) gain access to the latest tech, and easily integrate the various components (such as ID checks) via software development kits (SDKs). The outsourced identity functions prove valuable to companies, said McGibbon, as “it is such a painful process to actually do a digital identification online — and also to integrate it.”
These smaller firms do indeed know that they must facilitate interactions with people that, as McGibbon said, “could really go wrong.” However, they do not have the bandwidth, or maybe even the desire, to hire and maintain a compliance department in-house, nor do they relish the idea of keeping gigabytes of sensitive information on their servers. Yet, verify they must, McGibbon told Webster.
With Passbase an SMB itself, faced with the same challenges, McGibbon and Co-founder Mathias Klenk set out to solve the problem via the company. The goal is to supply SMBs with the technology they need, but make it cheaper and easier for them to access. McGibbon said firms need only change their coding slightly to deploy the ID functions to their own sites or apps.
The Sovereign Model
The wrinkle, McGibbon noted, is that the model reflects a trend in identification — namely, that of the self-sovereign ID. In reference to security features beyond biometrics, the company has employed public and private key encryptions, as well as blockchain. McGibbon said the sovereign ID approach is a perfect fit for the age of data privacy, mandated by GDPR and PSD2, where consumers wield more power over what data is shared and with whom.
With piecemeal data on offer (should the user choose to share only parts of their identity), the onboarding process can be tailored enough to be thought of as “zero-knowledge authentications. … This gives you a start [toward] managing your digital footprint and what you’ve consented to,” McGibbon explained.
“There is a big use case there,” he said of ID verification, “but a lot of the market is not optimized for it.”
Are end users ready to manage their own IDs? The sovereign model seems to bank on it.
When asked by Webster about friction (that point in the onboarding or transaction process when the IDs must be produced and verified), McGibbon said a number of the platforms Passbase works with don’t mind it, and even see it as a necessary part of the user-filtering process.
“Platforms that have high-risk transactions, and where the value exchange is higher value (the sharing economy, for example), are more willing to insert something that has a little bit more friction, but ensures that people who are onboarding are actually [authenticated],” he said.
McGibbon added that those companies are willing to make the trade-off in slightly fewer users if they can mitigate their risk of fraud or scandal.