The Digital Identity Industry in 2022 and Beyond

The ways and means by which identity is verified digitally have been put through the ringer in the past two years. Since the onset of the Covid-19 Pandemic in early 2020, many businesses and institutions were forced to take their operations online – in some cases for the first time, and in many others in a much more meaningful way than they ever had before.

Digital Identity, and the firms that design and provide solutions for the identification of individuals and businesses digitally, have invariably gone through their own evolution in recent years in a direct response to the changing digital landscape.

As Robert Prigge, CEO of Jumio puts it, “our space, the identity space, is now a crucial underpinning of the digital economy and all business.”

Like many industries, the next innovations in the digital identity space have been brought forward as the world sought to adapt to a decidedly more digital existence under lockdowns – and the many challenges that presented both individuals and businesses.

Cybercrime on the Rise – Digital Identification Gets Put to the Test

There was, and continues to be, a significant influx of bad-actors leveraging that rapid shift online – for which many companies simply weren’t prepared – to their advantage. “We are seeing new vectors and much more sophisticated attempts at gaming the system, and we’ve had to, as a result, quickly get more sophisticated about fraud detection, especially concerted larger efforts” says SheerID CEO Jake Weatherly.

This has spurred a flurry of innovation from these companies, who are looking to constantly be ahead of the next major “trend” in fraud and cybercrime. Beliefs around what is the most secure, what works, and what doesn’t change with time and with circumstance.

Not so long ago the belief in the industry was that biometrics were a complete game changer – today, CEO and Co-Founder of one of our portfolio companies SpyCloud, Ted Ross, believes that biometrics are only a truly effective defense on a local device (think fingerprint or FaceID on your iPhone), and that they’re actually capturable and exploitable in other instances, as he shared during a recent panel appearance on the present and future of the digital ID space.

It should come as no surprise that the events of the past few years – not just a pandemic, but also several high-profile cyber-attacks and data breaches – have driven an industry-wide push for proactive innovation and change.

The Impact of Regulatory Change

With the previously mentioned digital transition has come the challenges of managing and protecting personal data – required, somewhat obviously, to prove identity for a host of uses. As such, ongoing regulatory scrutiny over the space is a certainty moving forward.

The regulatory landscape around digital identification has struggled to keep pace, but many major jurisdictions across North America and Europe have adopted and/or updated the regulatory framework around digital identification with the intention of protecting consumers and their data as more and more of it gets collected by businesses around the world.

However, this can be viewed not so much as a problem for digital ID companies and solutions providers, but a new opportunity to help customers manage and protect the proper use of personal and corporate information moving forward.

What’s Next for Digital Identification?

While the pandemic has indeed brought on a host of new and increased challenges for the industry, it has certainly created opportunities for innovation and creativity. The applications for digital identification technology in an (almost) entirely online world go well beyond simply proving that an individual is who they say they are online to prevent fraud.

Digital ID tools can also be used, for example, affirmatively by businesses to better reach their desired audiences – one key change brought from the pandemic is the globalization of many businesses – an acceleration of a trend that has already been underway for several years – “local” businesses are becoming a thing of the past as e-commerce and digital solutions become all the more prevalent even for small businesses. With that shift comes the all new
problem of identifying and targeting your audience from a much wider pool of potential customers, and digital identification technology can certainly play a role in that process.

Elsewhere, the continued rise of cryptocurrencies, for example, has raised serious questions about what digital identification can even mean with a technology that is, by design, anonymous.

From a digital identity perspective, the biggest question facing the cryptocurrency industry is, how to balance that anonymity with the array of regulatory and compliance obligations across the global financial system. It’s a challenging question – and one which must be keeping regulators around the world up at night – but it also poses interesting lessons, and opportunities for future innovation from digital identification companies.

Check out this interesting blog post from Jumio for more on this topic.

The digital identity space is shaped by the events of the world around it, and lives in a constant state of change. It’s a category which the Centana team have long viewed as a crucial component of the financial services marketplace, and broader economy, and one which Centana’s Partners have been following and investing in since well before the founding of the firm.

It has been exciting to watch so many innovative companies emerge from a constantly evolving digital landscape, and a space which we will continue to watch with interest and excitement as the digital economy continues to grow into the post-pandemic era.