Fintech: Onfido to sell for $650MM to Entrust, an identity tech rollup
Fintech: Onfido to sell for $650MM to Entrust, an identity tech rollup
Since using Onfido's AI-powered identity solution, Revolut increased customers onboarded by 12% and Forrester increased conversion rates by 26%.
Hi Fintech Futurists —
Today’s agenda below.
IDENTITY: Onfido’s AI-powered Digital ID solution nears a $650MM sale to Entrust
LONG TAKE: JPMorgan's bank branch expansion mirrors Apple's retail magic (link here)
PODCAST CONVERSATION: The evolution of derivatives from structured products to decentralized perpetuals, with SynFutures CEO Rachel Lin (link here)
CURATED UPDATES: Paytech, Neobanks, Lending, Digital Investing
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Digital Investment & Banking Short Takes
IDENTITY: Onfido’s AI-powered Digital ID solution nears a $650MM sale to Entrust
British AI identity company Onfido is nearing a sale to Entrust in a deal worth up to $650MM. Onfido offers an AI-powered digital identity solution to help companies automate the onboarding of new customers, while adhering to KYC and AML compliance. This reduces costs by minimizing manual customer checks, increases the speed of approval for customers and, as a result, improves conversion rates.
The product works by using machine vision and a smartphone camera — just take a selfie and the software is able to cross-reference a person’s facial biometrics with their identity document to confirm their identity. As for results, Forrester increased conversion rates by 26% and Revolut increased customers onboarded by 12% since using Onfido.
On the other side of the transaction is Entrust, a company providing certification and verification services for payment cards, website access, passwords and more. Having been around since 1969, when it was formerly known as Datacard, Entrust has approximately 10,000 customers, including large banks and governments, and generates annual revenues of almost $1B. It is backed by a private equity firm, which has financed an acquisition roll-up strategy around the core business since 2011.
The synergies are clear. Onfido provides Entrust with a pre-built AI identity solution to bolster its existing identity verification offerings without having to rearchitect legacy infrastructure or build one from scratch. It comes at a time when data breaches are at an all-time high with 3,205 data compromises in 2023, up 78% from 2022, and more than 353 million people falling victim to ID theft. With this in mind, companies are looking to provide a secure experience for their users, while not having to instantiate significant manual processes that create inefficiency and add costs.
For Onfido, a potential valuation of up to $650MM indicates a welcome exit. In its last round in 2020, Onfido was valued at $100MM. While not much data is publicly available, Onfido reported that revenue grew 90% year-over-year in 2021, to achieve more than $100MM in revenue. In 2022, its net income of $44MM significantly beat competitors like Yoti ($22MM) and IDNow ($13MM). Assuming continued growth in top line and net, the $650MM valuation reflects reasonable exit multiples given the downbeat funding and M&A environment that fintech has been experiencing in the past 12-18 months. As for the company’s future prospects, there is clearly room to grow — as of 2022 the digital identity market size is estimated at $28B.
Entrust’s motivations makes sense, providing the company with AI identity technology to strengthen its offering in the digital identity space. Consolidation here is largely in the best interest of the consumer. A ubiquitous, common mechanism that users are familiar with helps both businesses and consumers alike to quickly move past the necessary hurdles of onboarding. Demand for these solutions is higher than ever, particularly as the growth of Fintech has opened up whole new attack vectors as an increasing amount of our lives move online.
👑 Related Coverage 👑
Blueprint Deep Dive
Long Take: JPMorgan's bank branch expansion mirrors Apple's retail magic (link here)
In this article, we delve into the contrasting trends of digitalization in banking and the strategic expansion of physical bank branches by JPMorgan Chase, despite the industry's push towards online and mobile banking.
While Bank of America and Wells Fargo have reduced their branch footprint, JPMorgan plans to add 500 more branches and renovate 1,700 locations, betting on the value of physical presence in an increasingly digital world. Comparing JPMorgan's approach to Apple's investment in retail stores, we suggest that both companies see physical locations as a key part of their brand experience and customer engagement strategy.
🎙️ Podcast Conversation: The evolution of derivatives from structured products to decentralized perpetuals, with SynFutures CEO Rachel Lin (link here)
In this conversation, we chat with Shelby Austin - CEO and co-founder of Arteria AI. Prior to this, Shelby was a Global AI Council member with the World Economic Forum, and before that, a partner at Davies Ward Phillips & Vineberg LLP. Shelby has also been Managing Partner of Growth & Investments and Omnia AI at Deloitte Canada.
A well-respected business leader, Shelby has been recognized for her work in driving significant growth through innovation and technology. Arteria AI was named one of Canada’s Hot 50 companies by Profit Magazine and Shelby, one of Canada’s Most Powerful Women: Top 100 from WXN.
Curated Updates
Here are the rest of the updates hitting our radar.
Paytech
⭐ PayPal invests in conversational AI firm Rasa - Finextra
⭐ Bold’s Series C funding hits $50m to revolutionise digital payments in Colombia - Fintech Global
Viva Wallet acquisition turns sour for JPMorgan as lawsuits filed - Finextra
Neobanks
Nubank sets sights on becoming Latin America’s biggest financial group - FT
⭐ SME banking challenger Finom raises €50 million - Finextra
Lending
Score is a new dating app for people with good to excellent credit - TechCrunch
YC-backed Cambio puts AI bots on the phone to negotiate debt, talk to a bank’s customers - TechCrunch
Digital Investing
⭐ Nasdaq Private Market Closes $62.4 Million Series B Financing - Nasdaq
Amundi buys Alpha Associates in latest private markets tie-up - Reuters
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