What does it take to build a global identity network? For starters, five billion digital identities.
To that end, the global identity verification firm Trulioo said on Tuesday (Sept. 17) that it has raised C$70 million in new funding to scale into its next growth phase.
The round was led by Goldman Sachs Growth Equity, with participation from Citi Ventures, Santander InnoVentures and existing investor American Express Ventures.
In an interview with Karen Webster, Trulioo CEO Stephen Ufford said the roadblocks on the path to real financial inclusion and a network that truly spans the globe can be boiled down to one key challenge: crossing the Rubicon from analog to digital.
Against the backdrop of fragmentation, where analog is stubbornly entrenched via paper files in cabinets, where PDFs are the latest and greatest steps in data delivery, it might make sense that progress favors the evolution toward, and creation of, a huge global database of IDs, stitched together from governments.
Perhaps that’s not the way it’s going to go after all.
As Ufford told Webster, past may be prologue, and the future journey toward proving identities may take a hint from the card networks.
“The writing’s on the wall from the payments space,” he told Webster. “The card networks have essentially given us the roadmap on how to solve identity when they solved card payments.”
By way of illustration, Ufford said there have traditionally been scores of siloed datasets across the issuing banks — and yet there is a framework the card networks provide through their rails and infrastructure, ubiquitous and trusted.
A cardholder, in other words, wields a trusted identity — and once the card is on the network, the customer can go anywhere the network is accepted and transact without giving credentials time and again.
The networks? Well, their reach grew steadily over the decades, starting back in the 1970s when commerce crossed borders and people began to travel more for work and play. Naturally, the card networks followed, making the necessary hardware investments at scale to satisfy demand.
As Ufford asked: “Why shouldn't identity function the same way? Why shouldn't we ask all the governments and all of the commercial parties involved to still continue to innovate and build all these different identity solutions? Why shouldn't there be a network approach that stitches together all these pieces just like the payment networks? It's a great solution.”
Any great solution requires scale, and scale is the Holy Grail of any network. Though the heavy lifting is formidable, contended Ufford, it is possible.
The tailwinds are there, he said, stemming from the growth of the gig economy, the globalization of commerce and the desire for end-users to experience as little friction as possible when it comes to transacting, and living life, online.
For Trulioo, the journey has involved providing instant, verifiable identities for over five billion consumers. This may give the impression that much of the population — globally speaking — is covered.
As Ufford pointed out, as Trulioo gets closer to the total [population] number, the challenge inherent in verifying identities is that it’s not just adults, but entire geographic regions — such as throughout Africa and parts of South America and Asia — that have yet to become part of the digital world.
“These are the ‘hidden people’ that we are really trying to serve,” he said. “We’re anticipating that the next two or three billion are going to be exponentially harder to reach.”
That’s because in the emerging markets, data — especially in digital form — is harder to come by, a nod to that analog-to-digital stumbling block.
Consider the fact that traditional credit bureaus typically are not in place in those regions, which means traditional data sources have been lacking — and in some cases, birth certificates may not even exist.
Moreover, where there is data to be found, noted Ufford, “it’s locked in file cabinets, literally in hard copy. The distance between getting that data from the file cabinet to a digital form so that it can be used to verify your identity so you can transact just like the rest of us — well, that’s a lot of distance to cover.”
Covering that ground, he said, is critical in helping the hidden people escape poverty as they embrace financial services, spanning everything from online commerce to micro-lending to starting their businesses.
The Business Side: Unlocking the Analog
The challenge of establishing online identities is not confined to individuals, of course, said Ufford. As he told Webster, the same issues bedevil the corporate realm, especially when it comes to verifying smaller and even micro-businesses taking root in emerging economies.
As Ufford noted, larger firms have a digital trail formed by any number of large incumbents in the data aggregation space (and within payments), tracking and building information databases that delve into beneficial ownership and other factors crucial for KYC and AML compliance. However, in far-flung corners of the globe, individuals are incorporating for any number of reasons — most of them legitimate, a few of them not.
“It obfuscates the whole process of getting to know somebody when there is a company between us and them,” said Ufford of digital ID efforts. “Again: Analog dominates, where scanned PDFs of documents dating back to, say, 1985 can be tracked down and emailed, but are hardly efficient in building a network of trusted identities.”
To be sure, not all countries should be painted with the same brush when it comes to collecting and presenting business-level data. Ufford pointed to Germany, which has strong KYC laws in place.
Also, this time around, the investments will not be so labor-intensive as they were in the 1970s, as the card networks pushed into new frontiers. This time around, we’ve got the cloud — so a tech-focused company with $100 million in funding (to date, Trulioo has raised a bit more than C$96.6 million ) may be able to do what once required the efforts of a $20 billion juggernaut.
As far as Trulioo’s presence on that buildout, Ufford said the work is akin to building out the telephone poles that carry the wires and, ultimately, the data — routing the information that allows networks to scale with operating rules, standards, codes of conduct and governance that will transform digital identity verification.
Where the Money Will Go
Asked for which new tools and techniques the funds are earmarked, Ufford pointed to data collection, which in the past has spanned credit bureaus and governments and in the near term will be tied to mobile carriers. There is also investment needed for the software that makes all of that raw data usable for ID verification.
“You’ve got to have an increasingly more sophisticated software stack,” he noted. “That means because we are a global service and not a regional one, interoperability issues have to be solved for our clients.” The software must account for regional and country-to-country differences between data collection and verification, he said.
The Bank Validation
Trulioo’s latest round of funding, Ufford said, validates the firm’s mission.
The roster in the Tuesday announcement includes marquee names among global, cross-border financial institutions, and frankly, there are not all that many of them.
“They are guardians of regulations and identity right now,” Ufford told Webster. “Whatever they adopt and whatever they do is going to play a major role in how the internet spins up digital identity … If you're building a network and there's an edge to the network, I think the banks are at the edge."