Mitek Systems Building New Business in Verifying Online Identities
A few years before the presidential election of 2016, with all its Wikileaks, Russian disinformation campaigns, and phony Facebook links, San Diego’s Mitek Systems (NASDAQ: MITK made a strategic decision to expand into identity verification technology.
Funny how things work out.
While mobile banking technology still represents 60 percent of Mitek’s business, COO Kalle Marsal said Thursday the company’s identity verification technology is now its fastest-growing business.
After paying $10.6 million in 2015 for IDchecker, a Dutch provider of identity and document authentication technology, and $15 million last October for iCar, a Barcelona-based specialist in digital identity verification software, Mitek recently closed its biggest-ever acquisition—a nearly $51 million deal for A2iA, a French company focused on artificial intelligence and imaging technology.
Mitek is a onetime defense contractor that re-invented itself as a technology provider for the banking industry—initially with computer vision technology for handwriting recognition (i.e. reading signatures on checks) and then with mobile deposit technology. The company now counts more than 6,100 U.S. banks and credit unions as customers, including 99 of the top 100 banks.
Mitek’s decision to expand into identity verification came about four or five years ago, Marsal said, as the company anticipated a plateau in its U.S. market for mobile banking technology. With a market valuation of just $300 million, Mitek still ranks as a microcap. But the company is finally gaining momentum after struggling for years.
In the fiscal year that ended last September, Mitek said its annual revenue had increased 31 percent to a record $45.4 million (from $34.7 million in fiscal 2016). It was the company’s third consecutive year of revenue growth of at least 30 percent—and it is expected to continue this year, Marsal said. For fiscal 2018, the company’s guidance estimates its revenue will come in around $60 million.
In an e-mail, Marsal wrote, “For fiscal year 2018 we guided the market that the mobile deposit business will grow 15–20 percent, and the identity verification business will grow 65-70 percent. However those figures were before we acquired A2iA. After the acquisition, we now expect our identity verification business to grow even more.”
Marsal said Mitek’s identity verification business is growing fast because there is a global push for better methods for verifying that an online user is really the person they claim to be. The foremost example of this push is Facebook (NASDAQ: FB), which recently disclosed it deleted some 583 million fake user accounts in the first three months of this year.
In another step to address the issue, Facebook said in January it had acquired Confirmed.io, a Boston-area startup developing identity verification technology. Confirmed.io had developed software that could be used in Web and mobile and Web apps to authenticate users’ identities (based on driver’s licenses and IDs) via computer vision and machine learning technologies. Mitek has similar technology, and Confirmed.io was a direct competitor, according to Marsal, who cited Facebook’s acquisition as a validation of Mitek’s strategic move into identity verification.
But Facebook is hardly alone. According to Marsal, companies across a broad range of industries are searching for better verification technologies. In financial services, for example, companies are required to verify user identities to meet anti-money laundering and “know your customer” regulations. “In the digital economy, establishing trust is really important,” Marsal said. “Trust in the other party. Trust in the service provider. The best way to establish trust is to force people to prove their identity.”
One method is to challenge a user with a few questions about their personal history, such as identifying a former address from a multiple-choice list of addresses. But massive breaches at Equifax and other databases have exposed this type of personal data, and “that type of information is increasingly no longer trustworthy,” Marsal said.
The approach Mitek has taken requires a user to use their smartphone to take a photo of their driver’s license or another government-certified I.D., Marsal said. The company’s machine learning software inspects the image to determine if it has been Photoshopped or falsified. The user is then asked to take a selfie, and Mitek’s A.I. technology compares the driver’s license photo with the selfie.
“In a matter of seconds, you can prove your identity,” Marsal said. “We are selling this capability to online customers.”