Onfido reaches for reusable digital identity tipping point
When Onfido appointed Yuelin Li as chief strategy officer ahead of a planned initial public offering in April of 2022, the U.S. Federal Reserve had just raised its prime interest rate for the first time in two years, from a historic low. It would increase six more times during the year, and Onfido’s plans for an IPO have been shelved.
No-one has really gone public in the past couple of years, Onfido CEO Mike Tuchen points out in an interview with Biometric Update. He sees signs of a shift back towards more optimistic outlooks around the industry, but notes that the profile of what the market values right now is very different from what it was then.
Two to three years ago companies with strong growth in an “interesting market” were “going to get a great value,” he says. Now, more emphasis is placed on short-term profitability.
A few years ago Onfido grew 90 percent, Tuchen recounts, but “we were also burning a lot of money at the time to drive that kind of really, really fast top-line growth.” The past couple of years for Onfido, therefore, have been largely about rebalancing.
That process is now bearing fruit, according to Tuchen, who expects the company to be “cashflow break-even by the end of next year. That’s a critical milestone and that starts to open the door for a lot of other conversations,” he says.
It was a process, however, that involved “unhooking ourselves from the drug of other people’s money,” Tuchen relates. “When you have a lot of other people throwing money at you, you treat it like it’s free. And then you keep spending money and then you keep having more and more. We can all point to other companies that fit that profile.”
In contrast, as a company that is cashflow break-even, “you now own your own destiny. You’re growing in a sustainable way based on the customers and business you’re driving and the results you drive for them.”
The biggest individual change at Onfido during that transition may be the acquisition of Airside Mobile, allowing the company to move into reusable digital identity.
“The driver wasn’t about immediate revenue; it wasn’t about path to profitability,” says Tuchen. “What it was really about was strategically we see this concept of privacy-first reusable sharable IDs as being the killer app for people in our business. It’s really where the world’s going.”
He describes Airside’s verified IDs as an equivalent to the traditional ID document scan and selfie biometrics; but with “tens of millions of already-strongly verified identities that with one click they can share with you. It’s faster, easier, cheaper, 100 percent pass rate, with a more secure outcome.”
To deliver this, Tuchen says, you need both the right technology and the right entry point. “It’s all about solving for the cold start problem.”
That entry point must have high volume, a high level of certainty and ease of reuse.
Tuchen sees reusable ID converging with orchestration services, the launch of which has been the company’s other major step over the past two years.
But ultimately, he says, “If you’re thinking about the future, you better be thinking about reusability.”
The capabilities are complimentary and overlapping. Airside is integrated into existing orchestrations, but has also been plugged into Onfido’s orchestration framework. “You can easily imagine a flow that says, ‘If the identity exists in Airside, use it, if not, fall back to document-based,” Tuchen explains.
“Right now the vast majority of our customers, as they’re signing up, they’re using orchestration as a key part of their onboarding and how they integrate us.”
Airside is growing “incredibly rapidly” and expected to continue doing so, but from a much smaller base.
Each of the different entry points, digital identity orchestration and reusable digital ID, are building Onfido’s network, Tuchen says, which attracts more customers.
“As your travel network gets bigger, people in financial services say ‘I’m getting a high enough match rate now I want to take advantage of that,’” he says. “And they start adding their own identities into it as well, so you now have this mutually reinforcing thing.”
Reusable digital ID will have “very high growth rate for years to come,” and start pushing up the growth rate on other side as well, according to Tuchen. Eventually, it will start to look like one big network instead of two smaller networks.
Tuchen is cagey on the current total size of the company’s network. Onfido announced in 2022 that it had crossed $100 million in annual revenue, and it will announce when cross $200 million, Tuchen says, establishing the range.
Continued growth will rely, in addition to the architectural considerations above, on blocking fraud attacks at the source and detecting deepfakes, which represents the leading edge in biometrics research. That research will remain “a game of cat and mouse for years to come,” Tuchen says.
Cheapfakes are steadily being eclipsed by more sophisticated AI. Some fakes are still visible to the naked eye but evade algorithmic detection. In that case, Tuchen says, “The question is; what is your eye perceiving, and how can we train the model to do the same thing your eye is doing. And we’re getting really good at closing that gap.”
The trend, however, is moving in the opposite direction, and Tuchen believes deepfake concerns are “the new normal” for the industry.
At the same time, there is a rapidly evolving standards environment, changes in regulations, and the move towards reusability, which are the big trends Onfido is betting on.
The changes are happening at “different paces in different places around the world,” which sets up corporate decisions about priorities, Tuchen explains.
Onfido is currently focused on growing in its core markets in North America and Europe, with “a side order of APAC.” The company aims to scale its network towards the tipping point where match rates for pre-verified digital identities are high enough to be immediately attractive to businesses.
When that time comes, the macro-economic situation may be different. In the meantime, Onfido will continue on its current mission, which Tuchen describes as “building a network effect business.”