Shifting consumer behavior toward more online transacting and financial services — and rising online fraud — are among the drivers behind the rapid growth of automated identity verification technology provider Socure, which this week closed a $450 million series E funding round.

The New York-based fintech has raised a total of $649.6 million in 14 rounds, according to Crunchbase, and the company’s valuation has leapt more than threefold from $1.3 billion in March to $4.5 billion.

“Identity and fraud and verification — opening credit and other financial services accounts without any friction and a really seamless UI and UX from the consumer perspective — is an increasingly mission-critical offering for financial services companies of all stripes,” Nate Stulman, managing partner at financial consulting firm and investment bank Solomon Partners, told Bank Automation News.

The online and mobile environments have high instances of fraud and difficulty with friction associated with verifying identity, Stulman added, noting, “Socure is a leader and emerging winner in that space.”

Further, financial crimes have increased as companies have had to offer digital services due to the COVID-19 pandemic, noted Lyle Solomon, principal attorney at the multistate Oak View Law Group. In 2020, there were nearly 1.4 million identity theft incidents reported in the U.S., more than twice the approximately 650,000 reported in 2019, he told BAN.

“When you think about financial institutions and what do they do, they manage risk,” said Socure co-founder and Chief Executive Officer Johnny Ayers. “As they are moving from traditional retail brick-and-mortar financial centers into this digital age and want to start to engage the digital consumer journey, the very first part of that is verifying” that people and entities are who they say they are, he added.

Additional markets

Socure has also seen 221% year-over-year growth in its customer base, and that has included telecommunications, gaming, human resources and payroll, cryptocurrency exchange and BNPL companies, Ayers told BAN.

“We’re growing about twice as fast as we had planned for the year,” he said. “I think it really expanded the market opportunity that investors saw and showed that a secure digital identity verification/fraud prediction platform could really be replicated across any consumer-facing market.”

In what Stulman called “a good strategic endorsement,” a number of Socure’s bank customers have also become investors, including in this latest and earlier funding rounds. Those include $2.3 trillion Citigroup, $423.4 billion Capital One and $1.9 trillion Wells Fargo. Some well-known fintechs are also getting onboard as customers, including digital banking app Chime, personal finance company SoFi and investment platform Stash.

Socure’s products include its fully automated ID+ platform, and the company plans to use this cash infusion to accelerate product development — with a continued, stringent focus on security — and expand into new verticals, Ayers told BAN. It will also look to retain and build its product, data science and engineering teams.

In that vein, Ayers noted Socure is now at a headcount of a little more than 400, and “we’re aiming to be close to 500 people by the end of the year.”

The target

Socure has stated a goal and mission of being able to verify 100% of legitimate online identities, at first targeting the approximately 265 million individuals aged 18 and older in the U.S. It’s not a goal that can be reached once, Ayers pointed out; it’s a continually shifting, dynamic target, with people dying and coming of age every day, and difficult-to-capture elements such as immigrants or the homeless.

Where is Socure now with this goal?

“We can automatically verify either physical documents or [personal identifiable information] for 98%” of U.S. adults today, Ayers said. “We are getting very, very close to being able to fully automate everything.” Any improvements, he added, tick up by tiny increments.

Making improvements is “a super-complex engineering and data science problem,” said Ayers. “We had to approach this in a different way than anyone else in this market has historically.”

That meant building out and analyzing more than 17,000 features of a consumer’s identity, including things like email addresses, phone numbers, physical addresses, date of birth, IP addresses, devices, images and physical documents.

It also included constructing what Socure claims is the largest database of known good and bad identities, according to Ayers. “When you’re training machine learning models, you need this data set,” he said.

IPO?

On the question of whether to go public, Ayers said he has “lots of ideas, lots of thoughts.” The company is now “in a good spot on the capital side,” he noted, but an initial public offering (IPO) would provide additional liquidity and visibility with customers.

“We want to be ready in 2023,” Ayers said regarding an IPO. “Then we’ll make what’s the right decision for us and our investors and our team.”