The leading US bitcoin exchange, Coinbase, has begun using Jumio’s face match software for digital identity, adding another layer of legacy financial services on top of the cryptocurrency protocol that was created as an alternative to the traditional system.
Coinbase has been working with Jumio for several years, using the company’s identity verification service NetVerify. More recently, Coinbase has added a tool which requires some customers to take a selfie and a picture of their photo ID so Jumio can compare those two portraits. The process is used as a way to make sure the identification document a customer is scanning isn’t a stolen one.
“Coinbase selectively uses face match based on a number of factors,” said Soups Ranjan, director of data science at the bitcoin exchange.
Jumio’s ID verification service is particularly helpful for Coinbase since Jumio has a large global coverage. That “allows us to expand to new markets without having to integrate local ID verification partners,” said Ranjan.
While he wouldn’t get into the specific factors Coinbase uses to judge whether someone should complete the face match process, generally in financial services rules will be set based on a certain customer’s risk level, transaction size and geography.
This, and other recent developments from bitcoin businesses comes after years of bitcoin enthusiasts arguing that bitcoin's design was enough in and of itself to deter fraud. But as bitcoin and other cryptocurrencies rose in prominence, the industry has seen a rash of hacks, thefts, scams and plain old losses that make it obvious that the businesses interacting with end users need more mature protections in place.
Not only are bitcoin businesses offering traditional financial services products to create better user experiences, but the industry is also adopting these products based on the regulations that today more clearly apply to the technology.
“What we see with scores of our customers is there’s a need to cut down fraud not only to protect the company but also their customers,” said Robert Prigge, chief revenue officer at Jumio.
Weaving in face matching and biometrics, Prigge said, “That absolutely squashes fraud and creates a gigantic barrier for fraudsters. Submitting a stolen ID takes some guts … [but] no one would be insane enough to take their own selfie if they were a fraudster."
Jumio could seem a strange choice to continue business with following its Chapter 11 (bankruptcy) restructuring in March and April this year after legal issues concerning actions of the company's’ former management and executive staff. But Jumio completely changed its management team and now, according to Prigge, is in the strongest financial and business position it's ever been in.
In the third quarter of 2016, Jumio saw 47% growth, verifying 100,000 IDs per day, said Prigge.
But the momentum for legacy providers could shift as digital identity startups get products to primetime.
“Legacy companies' cost structures are expensive. And startups can build lighter solutions that make it cheaper,” said Vinny Lingham, cofounder and CEO of Civic, a blockchain-based ID verification business. “With the innovation done at the product level, all these [traditional] companies will struggle in keeping up with blockchain-based strategies.”
But on the other hand, Lingham said, legacy players have trusted brands and tried-and-true products.
Lingham’s company, Civic has secured a couple of large partnerships, including one with TransUnion, after launching its product publicly only three months ago. Chicago-based TransUnion offers credit information and information management services to about 45,000 businesses and 500 million consumers worldwide.
That said, Jumio has a history in the Bitcoin space, according to Prigge. The other client in the market that Jumio can speak publicly about is Krypto Tech, a Spain-based cryptocurrency company that uses the ID verification for its PoolMiners Card, a cryptocurrency loaded prepaid debit card.
“They want to connect the digital identity to the real world identity,” said Prigge. “A lot of these newer players are more focused on authentication and re-verifying in the digital world. But that doesn’t allow you to verify who you are in the real world.”