2019 Predictions: How Did We Do?

January 27, 2020
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Each year, we put together our predictions for the year ahead in identity. Now that 2019 has come to a close,  we’ve taken some time to reflect and check in on how we stacked up. We saw some strong hits, some unfortunate misses, and some that just haven’t quite come to fruition…yet. Take a read through and if this has you wondering what’s in store for 2020, we’re one step ahead of you: check out this year’s predictions as well.

 

1. Facebook announces another big data hiccup…to limited impact

Facebook makes headlines again in 2019 with another high-profile mismanagement of user data, with the outrage dying down sooner than expected. While Facebook user growth plateaus, loyal Facebook users remain undeterred by headlines as a sense of fatalism sets in regarding monetization of social media data. Despite continued calls for their ouster, Mark Zuckerberg and Cheryl Sandberg remain at the helm of HMS Facebook, protected by Zuckerberg’s continued control of a majority of Facebook’s voting shares.

 

Result: Nailed It!

Hate to say I told you so. By our count, Facebook disclosed major data breaches in March, April, and December of 2019, with a potential impact on over 1.4B users globally. Meanwhile, the growth of daily active users continued unabated through Q3 2019 with no stated declines across any of Facebook’s four global operating regions.

 

2. Smartphone sales begin to decline globally, as mobile identity has a breakout year

With the global smartphone market beginning to reach maturity, and upgrade cycles in developed markets lengthening, the monetization of mobile identity data will take on a new focus in 2019. Companies like Drawbridge, Boku, and Payfone are well-positioned for this era of smartphone ubiquity, as the primary access to smartphone identity and carrier billing data becomes increasingly valuable.

 

Result: Nailed It!

Global smartphone sales continued to plateau in 2019, with marginal 1% growth in Q3 2019 offset by two straight years of previous quarterly sales declines. Meanwhile, LinkedIn snatched up identity graph leader Drawbridge, Boku acquired Danal to push their chips all-in on mobile identity, and Payfone raising a $24M series G to target global expansion. Breakout indeed!

 

3. Identity verification and document authentication companies go bank or bust in 2019 

Increasing reliance on smartphones as a customer onboarding channel and decreasing tolerance for friction continues to drive demand for document-based onboarding solutions in the U.S. Globally, growing smartphone penetration, increasing global acceptance for eKYC, and a continued lack of reliable access to high-quality identity data sources are leading international players to rely on document scanning for KYC. Mitek, Acuant, Au10tix, Jumio are poised to benefit from a surge of interest in leading document verification players, as larger identity players consider acquisitions to plug holes in product roadmaps.

 

Result: Nailed It!

Take this one to the bank, as 2019 was, in fact, a big year for identity verification and document authentication players across the globe. Investment continued to pour into the space with Au10tix and Onfido closing on a combined $105M in new funding, Mitek’s stock probing levels last seen in 1999, and Jumio hitting record sales growth. 

 

4. IAM companies are forced to evolve as enterprise cloud providers give it away for free

IAM is the “free shipping” of cloud computing, a feature that consumers were originally accustomed to paying for but have since. Okta, ForgeRock, and Ping found success growing alongside their customers, repeat success with the next generation of startups may be difficult as these companies IAM needs may be met by free offerings. Expect IAM players to begin offering additional value-add services.

 

Result: Sorta

While the threat of “featurization” by the major big tech cloud providers continues to loom over the IAM segment, this spurred innovation across the sector.

 

5. The US (attempts) to establish national data privacy standards

OWI expects continued pressure from across industries to harmonize US data privacy regulation, as businesses seek to avoid complying with a patchwork of 50 different state laws. Federal legislation establishing “GDPR-lite” standards will be proposed, but fail to gain the bipartisan support required for passage. In the interim, states will continue to fill the regulatory void with patchwork efforts across jurisdictions.

 

Result: Womp Womp

You can’t win ‘em all. While the need to take action on data privacy remains one of the few areas in which consumers and both major political parties are in near-complete alignment, it just didn’t happen in 2019. 

 

6. Behavioral biometrics catch on and become the must-have technology for any risk team

A steady drumbeat of consumer data breaches in 2019 will continue to lessen consumer faith in the ability of traditional password-based authentication methods to keep their accounts safe. A digital-only bank will be the first US financial institution to implement completely “password-free” login flows. Save “death of the password” pronouncements, as the username/password combination will continue to remain relevant for billions of global users despite continued adoption of continuous authentication technologies.

 

Result: Sorta

To paraphrase an old cliche: nobody ever went broke underestimating just how long passwords would continue to cling to life as the dominant authentication method. While behavioral biometrics have become omnipresent, many implementations in 2019 remained focused on identifying account takeover and reducing fraud, as opposed to fully supplanting the use of passwords in user login flows. Here’s to hoping in 2020!

 

7. The flood of sharing economy company IPOs will require faster, cheaper, and more complete background screening

Demand will continue to grow for the ability to perform “real-time” background checking on mobile applicants to sharing economy platforms. OWI expects to see the increasing use of artificial intelligence and machine-learning technologies to supplement human grunt work and decisioning. 

 

Result: Sorta

We’ll take partial credit here. While there may not have been a “flood” of 2019 sharing economy IPOs, continued growth of online-to-offline platforms did drive a strong demand for faster and more complete background screening. Meanwhile, leading platforms such as Checkr, InfoMart and Intelligo brought forth the application of AI, and near “real-time” screening capabilities to drive down costs and reduce manual processes.

 

8. NYC becomes the new epicenter of the global identity industry

At the end of 2018, we saw a flood of Big Tech interest in NYC with Amazon’s announcement of HQ2 in Long Island City, as well as Google’s multi-billion dollar building purchases to double its staff in the City. Big Tech brings better talent at a time when droves of techies are leaving and/or looking to leave the Bay Area because of the high cost of living. Washington, D.C., Berlin, and Singapore will also become major hubs.

 

Result: Sorta

The dream of a Long Island City HQ2 may be dead but we’ll always have the memories and the 3,500 Amazon employees who still work in NYC. While New York has certainly seen it’s fair share of exciting identity company growth in 2019 (present company included), so have markets across the company and globe. From Vancouver and the Washington beltway to Atlanta, Berlin and Austin, the diversity of identity startup geography has remained as broad as the applications for digital identity itself.

 

9. Data breaches will happen at the same frequency despite advances in technology and awareness

Cybercriminals will continue to see success in 2019, primarily as a function of the sheer size of the attack surface requiring defense. While FTC penalties and oversight will increase in the US, market forces will continue to be the primary enforcement mechanism in the US as breached companies shed billions in market capitalization. Overseas, the EU will see the first major enforcement action under GDPR as a global tech giant faces a multi-billion dollar fine over data processing and breach notification failures.

 

Result: Nailed It!

File this one under predictions we wish we had gotten wrong. On the heels of a terrible 2018, last year set new records across the board for data breaches, whether measured in total incidents (up 33%), number of records breached (>7.9B records exposed), or economic impact ($8.19M average per breach). This was despite the predicted 44% growth in consumer awareness of two-factor authentication (2FA) technology, and 23% growth in 2FA adoption. 

 

10. The gap between more and less advanced risk and security teams continues to grow wider

Having already moved beyond vulnerable technologies such as knowledge-based authentication and SMS OTPs, organizations on the vanguard of risk and cybersecurity will be well-positioned to implement the next generation of endpoint security and behavioral biometrics technologies. Lagging organizations will continue to fall further behind, as earlier failures to adapt to a changing cybersecurity threat environment compound the time and resources required to get back up to speed.

 

Result: Nailed It!

While the death of the password should be predicted at one’s own peril (just ask us), this hasn’t stopped leading organizations from continuing to forge ahead with adoption of new technologies. 

 

11. Amazon gets in the banking game

Amazon continues to spool up its entry into financial services while AVOIDING obtaining a bank license through either a de novo application or acquisition of a licensed US bank. OWI expects Amazon to continue to “nibble around the edges” of financial services by offering small business lending products through regulated bank partners, and alternative consumer payment options through closed-loop payment systems. This presents a unique choice for big banks in 2019: strike deals with Amazon to be the “dumb money” behind their regulated financial services offerings, or band together to fight the encroachment.

 

Result: Nailed It!

Amazon continued its penetration into financial services in 2019, while steadfastly avoiding the acquisition of an existing bank or application for its own US banking license. From co-branded credit cards (AmazonPrime Visa), and prepaid cards (AmazonCash), to consumer insurance (AmazonProtect), small business finance (Amazon Lending), and digital payments wallet (AmazonPay), Amazon is now competing across nearly all facets of the retail financial services market. 

 

12. Alternative credit scoring goes mainstream

As emerging markets continue to gain wealth, investor demand to service these markets higher-value goods and services will force financial services providers and payments companies to get creative. New services, such as UltraFICO, are already paving the way for new methods of credit scoring.

 

Result: Nailed It!

Perhaps the biggest indication of alt credit going mainstream was the Federal Housing Finance Agency’s announcement that VantageScore would be eligible for consideration by Fannie Mae and Freddie Mac as an alternative to FICO. Further, according to estimates from Experian, over 65% of lenders in 2019 now utilize information beyond traditional credit reports to make lending decisions. OWI expects this trend to continue in 2020.

 

13. Aging digital infrastructure keeps aging

The Tech industry’s call for the Federal Reserve to build a new real-time payments system, against bank opposition, builds momentum for improved digital infrastructure. 

 

Result: Nailed It!

While work at the Federal Reserve continued toward the launch of the FedNow real-time payments system, 2019 saw continued momentum for the launch and development of competing digital financial infrastructure platforms. Facebook’s Libra initiative, the Financial Data Exchange open-banking API standard, enhancements to NACHA’s same-day ACH processing, 

 

14. Specific tech niches clamor for regulation and identity companies stand to benefit

Gatwick’s recent drone mishap highlights the need for regulation to help the industry continue growing. Solutions to drone registration will require improved identity management. This won’t be confined just to the drone space, but any area where regulatory ambiguity remains a barrier to scale.

 

Result: Womp Womp

Sadly, chalk this one up to another good idea that didn’t come to fruition. Given the continued dysfunction coming out of Washington, we suppose it shouldn’t come as a surprise that there were no major pushes for regulation of previously unregulated sectors. However, we still believe that addressing regulatory ambiguity around areas like remote identity proofing would prove beneficial to both startups and investors alike.