Behind Every Payment Is An…?

The Fintech sector is expected to grow to $305.7 billion at a CAGR of 22.17% through 2023. The major driver of growth? Payments.

Of the $305.7 billion, the payments services segment is projected to generate revenue of $207.11 billion by 2023.  Notably absent from these projections is the direct dependency that the growth of the FinTech sector will have on identity management. Being in the business of moving “money” isn’t possible without understanding the challenges and opportunities that identity verification plays among the disruption in the payment ecosystem.

After being in the payments industry for 25 years and one thing always core to what I knew…. behind every payment was a person, an identity. A financial transaction starts and stops with a person at either endpoint. Amazon’s recent article, “Hand-Waving-Payments” provides no better proof post that payments and identity are intrinsically interwoven.

The global identity management market is expected to reach $24.52 billion by 2025. While the disruption in FinTech is a catalyst for this growth, unfortunately, so is the growth in Identity Fraud.

  • New account fraud is up 13% In 2018, new account fraud accounted for $5 billion in losses, according to Javelin Strategy. The most common targets for new account fraud are mortgages, student loans, car loans and credit cards.
  • Account takeovers are up 79% The number of account takeovers also increased, rising from 380,000 in 2017 to 679,000 in 2018. Both individuals and enterprises are at risk for account takeovers.
  • U.S. credit-card accounts lost $820 million due to Synthetic Identity Fraud in 2018, according to an Aite Group study, and losses are projected to climb to $1.25 billion by the end of this year.

Fighting fraud in the global digital economy has become more complex and more central to enabling a thriving ecosystem. As new payment methods have emerged, so have the methods and techniques for the rise in identity fraud and identity protection. Over the last 6 years [since the launch of Apple Pay, followed on by Google Pay, Samsung Pay, Apple Pay] we have consciously and subconsciously been linking our identities to our payments. We have been promoting bio-metrics as a verification method to move money, so Amazon’s recent patent is not far fetched.

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According to Forbes, “2020 will be the year of embedded financial services. We will move past selling digital versions of traditional financial products and enter a phase where payments, lending, and insurance functionality becomes integrated into existing technology products.” Embedded Financial Services has the potential to deliver $3.6 trillion in market value, surpassing the $3 trillion in value created by cloud and mobile platforms. – Bain Capital Ventures.

To realize the $3.6 trillion in market value, identify verification will be the cornerstone to facilitating embedded financial services. There is no doubt the convergence of Financial Services and Identity Verification has begun.

How we think about identity verification, how we on-board new customers and how we engage with existing customers is undergoing a seismic shift. No longer is verification a one-time event at the beginning of a customer’s journey but a series of incremental events based on need, task, risk-levels, context. No longer does verification require an action by a customer but rather a series of mathematical calculations that happen passively in the background.  And no longer is it acceptable to take days, or minutes to verify an identity, it needs to be done automatically, in session, with speed, and with accuracy.

Customers now expect seamless digital on-boarding, rapid loan approvals, and friction-free person-to-person payments – all innovations that FinTechs made popular. And while they may not dominate the industry today, FinTechs have succeeded as both standalone businesses and vital links in the financial services value chain,” a recent industry report by Deloitte and the World Economic Forum (WEB) stated.

At the core of our ability to deliver on the needs and expectations of our customers, is the much-needed change within the financial sector to validate each other’s identity. While who am I starts with the national identity or an identifier issued at birth, the evolution of me extends beyond my national identity to what I want, what I value, the choices I have made, and who I have become.

The future of identity verification is continuous, seamless, and adaptive, with less user “friction” than experienced today. Identity verification and authentication will become a perpetual, passive dynamic set of tasks that are informed by deep machine learning of context, content, historical patterns and, alternative data-sets creating signals that span multiple ecosystems.

Explore the future of identity verification >>>

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