© Copyright Acquisition International 2025 - All Rights Reserved.

Article Image - ID Verification: Cashing In On A $5bn + M&A Market
Posted 24th April 2024

ID Verification: Cashing In On A $5bn + M&A Market

Digital identity fraud is a growing threat, with the U.S. economy suffering over $52 billion in fraud-related losses in 2021 alone.

Mouse Scroll AnimationScroll to keep reading

Let us help promote your business to a wider following.

ID Verification: Cashing In On A $5bn + M&A Market
High technology security protection

Written by Adam Aziz, Investment Bank Analyst at DAI Magister

Digital identity fraud is a growing threat, with the U.S. economy suffering over $52 billion in fraud-related losses in 2021 alone. Peer-to-Peer (P2P) payment fraud rose by over 100% year-over-year, with account takeovers and P2P payments fraud also recording double-digit growth. As online transactions and remote interactions become increasingly commonplace, the need for robust identity verification solutions has never been greater.

The ID verification market has seen significant growth, with a diverse array of well-funded independent players vying for market share. Companies typically aggregate data from multiple sources, including biometrics, official documents, credit reports, social media, and geolocation, to deliver a comprehensive 360-degree view of potential customers, partners, and employees.

Growing Demand for ID Verification Systems

The growth in demand for ID verification systems can be attributed to several factors. Firstly, the rise of online fraud and identity theft has made it imperative for businesses to adopt stringent measures to safeguard their operations and protect their customers’ sensitive information.

Secondly, regulatory requirements, such as Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, have become more stringent, compelling organisations to implement effective identity verification processes to ensure compliance. The COVID-19 pandemic has accelerated the shift towards digital services, remote work, and online transactions, further emphasising the need for reliable and efficient ID verification solutions.

As a result, the ID verification systems market is experiencing significant growth, with businesses investing in advanced technologies like biometrics, artificial intelligence, and blockchain to enhance the accuracy and security of their identity verification processes.

Key challenges

The market faces several challenges that hinder its growth and effectiveness. One of the primary issues is the lack of standardisation across different countries and regions, with each nation having its own unique identification documents, making it challenging for businesses to implement universal verification processes. Additionally, the ever-evolving landscape of fraudulent activities, such as deepfakes and synthetic identities, constantly challenges the effectiveness of ID verification systems.

Data privacy and security concerns also pose significant challenges to the market. Businesses must comply with stringent data protection regulations, such as GDPR and CCPA, and ensure robust security measures to protect sensitive user information from breaches and cyber-attacks. Moreover, balancing the need for thorough identity verification with a seamless and user-friendly experience is crucial for encouraging user adoption and reducing abandonment rates.

The cost of implementing and maintaining ID verification systems can also be a significant barrier, particularly for small and medium-sized enterprises. The development, integration, and ongoing maintenance of these systems require substantial financial investments, which may lead to a competitive disadvantage for businesses with limited resources.

Addressing these challenges requires collaboration between governments, businesses, and technology providers to develop innovative solutions that can effectively combat fraud while ensuring user privacy and convenience.

Consolidation and specialisation

The digital identity verification space has seen a proliferation of midsized players, with over 50 companies that have raised between $10 million to $100 million to date. This highly competitive landscape has given rise to two distinct types of players: those focusing on specific verticals and those adopting a broader approach, resembling scaled-down versions of established strategics in the space.

Inorganic growth from incumbents expected to continue

The digital identity verification landscape is populated by several well-funded incumbents and a set of companies that have scaled to an attractive size, creating opportunities for rapid consolidation as larger companies seek to expand their capabilities and market share.

A key driver of this M&A activity is the need to navigate complex regulatory environments across different geographies, as acquiring a target with extensive local knowledge can be more effective than pursuing organic expansion. Large identity verification providers are also actively acquiring companies with differentiated technologies and functionalities.

Interest from outside the ID verification space

The importance of ID verification to strategics whose core product is not necessarily ID-related is another key driver for M&A in the coming years. In several industries, a proprietary, in-house ID verification scheme can improve user experience by providing added security or extending functionality of the platform.

What to expect next…

With over $10bn raised in the space to date, there is an estimated $100bn+ in enterprise value in a sector with a highly fragmented mid-market and over 50 M&A deals in the past 3 years alone. We expect the acquisition trend to continue, however potential targets must consider their strategic differentiators to stand out given the highly competitive environment.

Clearly, this presents a dilemma to companies in the space. The market is already awash with attractive targets with consolidation well underway – as incumbents place their bets, there is risk of a limited window in which to initiate an acquisition under favourable conditions. Companies should highlight key differentiators that enhance their value, such as domain expertise, strong customer relationships, geographical dominance, and proprietary technologies. Standing out in this market is difficult, but imperative to optimise outcomes.

Categories: Finance, Innovation, News


You Might Also Like
Read Full PostRead - Eye Icon
Lexial Is A Leading Law Firm
Legal
15/02/2021Lexial Is A Leading Law Firm

Created in 2007, Lexial Law Firm is an international beacon of excellence within the two main fields of business immigration law, and international criminal and political law. With offices across continental Europe, there is much to admire about this firm, inc

Read Full PostRead - Eye Icon
A Long and Strong Presence
Innovation
11/09/2017A Long and Strong Presence

A Long and Strong Presence

Read Full PostRead - Eye Icon
Technology That Matches the Purpose
Innovation
02/08/2022Technology That Matches the Purpose

Digitalisation continues to play a major role in shaping the future of the industry sector on the road towards Industry 4.0.

Read Full PostRead - Eye Icon
The Best in IP
Legal
29/09/2016The Best in IP

Founded in 1937 as a Patent and Trademarks Agency, Sena & Berton Moreno has grown to reach a workforce of forty people offering a range of services to its clients today.

Read Full PostRead - Eye Icon
AI and Metaverse Technologies Boost Training and Streamline Onboarding for Employees
Innovation
14/11/2022AI and Metaverse Technologies Boost Training and Streamline Onboarding for Employees

We live in a world where businesses constantly reinvent themselves to remain competitive. Automation and digitisation goals feature in well over half of all today’s businesses’ long-term corporate strategies, according to PwC's most recent annual Global CE

Read Full PostRead - Eye Icon
Producing Accurate Insights for Data Driven Organisations
Innovation
03/05/2019Producing Accurate Insights for Data Driven Organisations

DigitalMR is a technology company which uses Artificial Intelligence for market research and customer insights. Recently the firm found success in AI’s Global Excellence Awards 2019. On the back of this win, we profiled the firm and caught up with Sales & Ma

Read Full PostRead - Eye Icon
Handling Industrial Progress and Strategic Mergers
News
06/05/2024Handling Industrial Progress and Strategic Mergers

In an era where rapid change defines the business landscape, the adoption of industrial automation is a critical shift. Industries ranging from automotive to general manufacturing are seeing reshaped production environments due to advanced machinery

Read Full PostRead - Eye Icon
Brazil’s Go-To Boutique Law Firm
Legal
31/08/2016Brazil’s Go-To Boutique Law Firm

Based in Brazil, Maristela Basso Lawyers have become nationally renowned for their highly specialised legal services.

Read Full PostRead - Eye Icon
This is a test
News
29/11/2021This is a test

this is a test of the link system to see how it copes with the link replacement being a full system with no-follow links in it.



Our Trusted Brands

Acquisition International is a flagship brand of AI Global Media. AI Global Media is a B2B enterprise and are committed to creating engaging content allowing businesses to market their services to a larger global audience. We have a number of unique brands, each of which serves a specific industry or region. Each brand covers the latest news in its sector and publishes a digital magazine and newsletter which is read by a global audience.

Arrow