The Equifax hack, combined with the rise of online lending, may have turned 2017 into a golden age for companies with new ideas for ID.
Innovations in customer identification — such as so-called capture and identity technology — are suddenly more attractive to financial institutions after the data breach at Equifax, which in jeopardizing the personal information of 143 million consumers heightened the risk of identity theft and fake consumer and small-business credit applications.
“With the recent Equifax breach we all have to assume our Social Security numbers are in the public domain,” said Robert Meara, senior analyst at the research and advisory firm Celent. ”This is a scary time in traditional customer authentication.”
The early success of marketplace lenders, and banks’ efforts to partner with online lenders or start their own digital-lending units, only add to demand for ways to make sure loan applicants are who they say they are.
The software company Mitek plans to roll out a product in the coming year called Mobile Verify for Lending, which offers lenders a five-step process to quickly verify customer identities. Borrowers first share their online bank account information with lenders. They then submit four pictures taken from their smartphones: the front and back of their driver’s licenses, a selfie and a pay stub.
Its technology is able to “find and decode” security features on driver’s licenses and detect “liveness” in selfies, guaranteeing the photos submitted are legitimate, Mitek says. The multiple checkpoints and technological security are intended to be simple and secure.
Other players are offering digital lending solutions to make it easier for banks to keep pace with speedy fintech competitors. Upstart, for example, is marketing software, called Powered by Upstart, to banks wanting to get into digital lending.
Eastern Bank is among those that have developed their own technology. Starting in 2013 the Boston bank’s innovation lab developed real-time lending technology, with the added bonus of reducing the cost of originating loans. The innovation lab eventually was spun out as a separate firm called Numerated Growth Technologies, which sells its product to other banks in a similar manner as Upstart.
The kind of loans made with such technology varies. Eastern Bank had success with so-called Business Express loans of up to $100,000, while Upstart focuses on consumer loans and personal installment loans.
But lending is also not the only market for the kind of technology that Mitek plans to offer, according to company officials.
“Mobile Verify for Lending targets consumer loans such as auto loans or student loans, but it has applications for every kind of lending and for almost any kind of digital application that would benefit from real-time identity and bank account authentication,” Sarah Clark, the company's vice president of product and customer success, said through a spokeswoman.
Companies such as Trulioo, VixVerify and AuthenticID compete against Mitek and offer instant verification databases to financial institutions as well. Some firms use third-party analytics systems to extract data from images, but Mitek has the benefit of owning its own system, Meara said.
The appeal of verifying identity through capture and identity technology is that it replaces knowledge-based authentication. This traditional method of verification required customers to answer personal questions to prove their identity, but left room for fraud as “15% of legitimate customers cannot answer those questions correctly, while fraudsters will call back repetitively until they can answer them” said Shirley Inscoe, senior analyst at Aite Group.
“This is the technology whose time has come, and I think that with the repercussions of the Equifax breach that financial institutions might look at it and start adopting it more quickly than they might otherwise have,” Inscoe said.