EXCLUSIVE: ‘The Network Effect’ – Mark Midle, Goldman Sachs in ‘The Fintech Magazine’
Goldman Sachs led Trulioo’s most recent funding round – but it brings more to the table than cash. As Managing Director of its Growth Equity business, Mark Midle says the bank can help advance the identify and verification specialist’s wider, global ambition
The unprecedented expansion of online and ecommerce activity resulting from the COVID-19 pandemic, has placed identity verification provider Trulioo – fresh from a successful $70million capital injection – in a sweet spot in terms of its ambitious growth plans.
As online traffic increases, firms large and small need the ability to check users are who they say they are – but without compromising their experience. A solution provider that can square that circle is in a winning position.
A recent report by the Economist’s Intelligence Unit, Digital Disruption: Risks And Opportunities In The Shift To Online, estimates that online retail sales in the world’s 60 biggest economies surged by more than 30 per cent in 2020. And it anticipates further growth, suggesting that, by 2025, they could account for nearly 20 per cent of all retail transactions, up from 10 per cent in 2019… numbers beyond an emarketeer’s wildest dreams.
Back in September 2019, when Goldman Sachs Growth Equity led Trulioo’s Series C fundraise, none of that, of course, could have been known. But, as Mark Midle, managing director at Goldman Sachs Growth Equity, who now occupies a seat on Trulioo’s board, explains, it was already clear that the company was acing the identity verification (IDV) market.
“We’ve been following the shift to digital for several years and see identity verification as particularly critical, especially when companies don’t have face-to-face relationships with their customers,” he says. “Identity is a fundamental part of the digital experience, with regulatory and brand implications for platforms that fail to know their end users.”
“We were particularly impressed with the quality of Trulioo’s product – the most scalable and high-performing digital identity verification solution on the market – and the quality of its customers, which include hundreds of the world’s largest digital-first companies in financial services, payments, technology and commerce, who use Trulioo to support mission-critical operations across multiple geographies.”
In addition to the $60million Series C raise, which was also backed by Citi, Santander and Amex, Trulioo attracted an additional $10million in unannounced follow-on funding from early investors, bringing total external investment since its creation in 2011, to $96.6million.
The fresh injection of capital helped to propel Trulioo into the top 100 fastest- growing companies in its home country of Canada, as it continued its global expansion and further developed its proprietary GlobalGateway solution – a global marketplace for identity services and data sources with the potential to verify five billion individuals and 330 million businesses. The first trials of Trulioo’s EmbedID system, a low-code international verification system aimed at online businesses for which ID verification services are critical but not a core competency, were also begun in 2019.
These developments ensured that, when the world changed in March, 2020, the nimble fintech could adapt quickly to meet the needs of SMEs worldwide that found themselves suddenly having to implement digital solutions to meet the surge in consumer demand for ‘online everything’, while simultaneously remaining secure and delivering good customer experience.
Trulioo responded by making its identity verification services available to these small businesses, offering them up to 100 free identity verification transactions a month.
Explaining the rationale behind the decision, Trulioo’s COO, Zac Cohen, said: “The vast majority of small businesses simply don’t have the systems or financial reserves to respond to such immense disruption… [We] helped them mitigate their risk, build trust with customers and protect and grow their revenues in the most testing circumstances imaginable.”
Indeed, a TransUnion survey, early in the pandemic, estimated that 22 per cent of retailers worldwide had been the target of COVID-19-related fraud.
“We’ve seen ecommerce’s share of total retail nearly double in this environment, which is meaningful because ecommerce businesses don’t have face-to-face relationships with their customers, and verifying their customer identities is critical to protect their reputations and reduce fraud,” says Midle.
Meanwhile, financial services were also managing the challenge of keeping pace with unprecedented change, against a backdrop of tighter regulation.
“Within financial institutions, COVID has accelerated the shift towards digital solutions and non-traditional banks,” says Midle, “and identity verification is a necessity to facilitate that shift in a secure, safe, and compliant manner.”
It is the proportionate, risk-based, secure response that Trulioo offers them and, more recently, non-regulated businesses including retail, marketplaces and community platforms, that made it an obvious investment target. And it’s rewarded that faith – expanding to serve organisations of all sizes and sectors, including, most recently, in Pakistan, Slovakia, the Czech Republic, Nigeria and Ghana, extending its reach to 195 countries.
A GLOBAL REACH
Presenting itself as a one-stop shop for secure customer onboarding and authentication, Trulioo provides everything from initial user experience strategy and design, to implementation through proprietary plug-and-play solutions, and analytics. Businesses can select from ready-to-go modular options to suit their regulatory status, growth stage, target demographic and, importantly, ensure compliance wherever they (or their customers) are in the world. It does this by connecting to trusted identity networks, allowing it to validate against more than 400 data sources while ensuring the client organisation remains compliant with local regulation, such as Europe’s revised Payment Services Directive (PSD2) and General Data Protection Regulation (GDPR).
“Trulioo has the broadest global network, with relationships with about 500 data sources in close to 200 countries,” says Midle. “That’s significantly greater coverage than any other provider and, as a result, Trulioo’s match rates are significantly higher, and its customers get more value from its solution.”
Its mission and ambition have only been sharpened as a result of COVID-19 acting as an accelerant of fraud.
The Economist Intelligence Unit also took the opportunity to survey 1,610 executives responsible for growing digital commerce, customer protection and customer experience, across 12 economies, including Brazil, Canada, Chile, China, India, South Africa, the UK and the US, to understand how the trend towards digital is impacting their businesses. Its findings were published in New Dimensions of Change: Building Trust In A Digital Consumer Landscape, which showed
that COVID-related changes to digital transaction processes had resulted in two-thirds of participants experiencing glitches that increased the fraud risk. Eighty five per cent of respondents believed smooth and secure transactions were now ‘essential to survival’.
The report looked to national digital ID initiatives – administered by governments and using biometric data for authentication – as one potential solution.
“There are an estimated 70 countries with some form of national digital ID in place. Our survey found broad support for national digital IDs, with 71 per cent
of executives believing consumers are comfortable sharing data with governments… and private companies,” the Unit said. “The vast majority of respondents think national digital IDs will help fraud prevention in consumer transactions… [and] open untapped areas of economic opportunity, with 70 per cent believing they give lower-income customers access to more services.”
Among those lower-income customers are more than a billion people who don’t even possess traditional paper ID, such as birth certificates or passports – a major barrier to economic freedom that the United Nations has pledged to lift by 2030.
“There may be a day when people have a truly digital identity, that can be validated by governments, and Trulioo is well-positioned for that,” says Midle.
“Trulioo’s vision is, ultimately, to power a digital identity system. They have a network today, in GlobalGateway, but the real network effect of Trulioo will be when individuals can control their digital identity, and its usage, to validate and verify their own identity, in whatever situation.”
Midle, who occupies a seat on Trulioo’s board, sees the bank helping founder and chairman Stephen Ufford realise that vision.
“We work closely with Stephen and with Trulioo’s CEO, Steve Munford, integrating Trulioo with the expertise, relationships and network within the Goldman Sachs ecosystem,” says Midle. “Goldman Sachs brings a lot that is unique and complementary to other Trulioo investors. For example, we have relationships with the C-suites of nearly every company that Trulioo might want to do business with, and we have local market expert in virtually every geography Trulioo may want to expand into.”
The investor-directors have also been active in recruiting an executive team that can deliver on those opportunities for the regtech.
In a blog from December 2020, Trulioo expands on its vision of a planet-wide identity verification solution as one populated by ‘digital information that is configurable, translatable, adaptable and computable’ so that systems can communicate with each other automatically to determine verification and authentication that allows individuals to participate in services and opportunities previously denied them. It continued: “An identity network is a marketplace of hundreds of data sources, verification processes and tools that work together to identify who a person is… together, [they] have the potential to create a global web of verification – what the World Economic Forum might call a truly transformational digital identity system.”