German startup WebID Solutions offers video legitimation, a security service used by banks to remotely check the ID of customers who want to open accounts or get bank cards.
In days gone by, you had to go to a branch to show your ID before you could become a customer. But with bank branches closing and online services becoming the norm, video legitimation is in growing demand.
WebID, founded in 2012, now plans to expand into the US, where it has cleared an important hurdle by obtaining a patent, a vital step to entering the market. The company already does business with customers in 20 countries and wants to open offices in Silicon Valley and New York.
“We’re still looking for suitable offices right now, the top managers for the locations have already said yes,” said co-founder Thomas Fürst, who set up the company with Frank Jorga.
Video identification, which works by people holding up their ID card to a web camera and answering questions, is also being used by telecoms providers to check the identity of customers who have bought phone cards.
It’s a lucrative market, and there’s intense competition in Germany. The big players include WebID Solutions, IDnow founded in 2014, and German postal service Deutsche Post.
WebID said it has carried out some 3.5 million identifications since it was set up 6 years ago and generated €7.5 million ($8.7 million) last year. IDnow said it has performed “several million” checks and that its 2017 revenue was “slightly below the double-digit million area.”
Yet it’s still a rough business. WebID and IDnow have been embroiled in a patent lawsuit and are not averse to seeking court injunctions against each other. Deutsche Post, meanwhile, tried to buy WebID out of the market in 2015. “We ruled out a stake sale or a takeover,” said Mr. Jorga, who owns 90 percent of the company together with his co-founder. In 2015, two investors linked to investment firm Hannover Finanz took a stake and valued WebID at €20 million.
In the US, the company plans to start out by working with banks that already use its service in Europe, such as Deutsche Bank, Barclays and American Express. Mr. Jorga said he’s also talking to potential new clients including a payment services company that could use video ID to combat fraud in online retailing by verifying the age of people who buy films and video games.
WebID will also have its fair share of rivals in the US, including Jumio and Mitek Systems. But Mr. Jorga is confident. “The others can’t match our security standard, we supply quality made in Germany,” he said.
To be sure, US regulatory requirements are laxer than in Germany, at least when it comes to retail banking. “For banks in the US the rules on checking the identity of their customers on the basis of documents aren’t as strict as in Europe. But there are requirements for the identity to be checked,” said Norbert Gittfried, a compliance expert at consultancy BCG. “In the US too, video identification can make an important contribution towards preventing fraud — which is in the banks’ own interest.”
Katharina Schneider covers financial markets for Handelsblatt. To contact the author: firstname.lastname@example.org