DeFi opportunity for biometric verification providers
The burgeoning decentralized finance or ‘DeFi’ sector could prove a fertile ground for biometric verification providers should services require users to identify themselves.
DeFi is a catch-all term for any form of finance that uses blockchain smart contracts between users for transactions, and not an exchange or bank. The most common use case is cryptocurrencies, typically traded anonymously.
At the other end of the peer-to-peer spectrum, Kiva Protocol is a decentralized identity system acting as an exchange or broker to provide a centralized finance function, including meeting regulatory requirements.
Speaking to Pymnts.com, Max Carnecchia, CEO of Mitek described how self-imposed transparency requirements in the sector, plus existing, financially regulated institutions using the technologies could lead to biometric KYC and user authentication.
Carnecchia estimated the cryptocurrency sector to already be worth around $2 trillion, making it meaningful globally if not a threat to traditional banking. He said that decentralized finance is disruptive and a “tech-driven innovation that’s driving this change.” Simply put, new technologies are allowing a whole new set of financial transactions.
“You’re a regulated entity and you have to live up to those regulations – it’s that gray area,” said Carnecchia, speaking the situation currently facing existing financial businesses using exchangeless blockchain products.
Carnecchia says that while decentralized means there is no authority regulating a sector, it does not mean that DeFi cannot be used for other purposes. Sector innovation and user demands for transparency to foster trust in DeFi could push for KYC requirements for some providers. Some cryptocurrency exchanges such as OKcoin and Coinbase already require it.
“We absolutely see if for transfer payments, we absolutely see it for account set ups, where the real reputable ones – the ones that are doing things where they’re trying to take the long view and they know that sooner or later regulators and government authority will step in,” says the CEO of cases where KYC is starting to be required in DeFi.
“They’re doing the right thing and it’s an active part of our business.”
Carnecchia argues that any biometrics used for verification or authentication in DeFi settings “need to be at the banking grade, they can’t be consumer-grade technologies that we maybe are used to on our phones.”
Mitek’s revenues have increased by 25 percent in its latest financials. The firm recently acquired ID R&D for $49 million to integrate its voice and fact biometrics and liveness capabilities to secure the entire transaction lifecycle for business and consumer.