These companies are using the services of startups such as IDfy, VerifyDigital, inVOID and Yoti to identify employees, run checks on gig economy workers and providers of shared services like bike rentals, car rentals, and for dating and marriage services.
This has helped these startups generate as much as 30-50% of their revenues from non-financial services businesses, up from around 15% till a year ago, according to various industry estimates.
Financial services platforms used these services because of mandatory Know Your Customer or KYC norms, but authenticating customers is now becoming basic industry hygiene, experts tracking the space said.
“We are getting around 30% of our revenues from shared-economy companies like ride hailing startups, rental companies, companies in travel and accommodation and others,” said Wriju Ray, cofounder of Mumbai-based IDfy.
Palaash Ventures and IIT Roorkee-backed inVOID, which started operations in April this year, is working with companies like Nestaway, Mobycy, ONN Bikes, OnTrack, ZoloStays and others, getting 45% of its business from such entities. The company claims it does around 20,000 verification checks a day and is growing at 30% each month.
Customer onboarding with minimal verification gets companies the initial scale, but beyond that there is a need for genuine users and that is where authentication startups step in.
“One of our most used offerings is the face recognition software, which ensures that the applicant’s face matches fully with the government-approved document that they are mandated to provide. We also do a liveness test on the applicant,” said Saru Tumuluri, chief executive officer, Khosla Labs, which has backed VerifyDigital.
The company works with companies like Cashify, which trades inused phones, and ride sharing app Quick Ride.
Corporates, who use their services to verify job applicants and employees, are another big source of business for these startups.
Around 30% of revenues come from these companies, said Ray of IDfy.
With 30 to 40 major brands working with them, IDfy has seen this business double over the last one year.
The availability of data from sources like electoral rolls, electronic court records and digitised First Information Reports in some states help these companies validate customer data better, experts said. They also use GST or PAN card data in some cases.
In many cases, since there is no scope for direct integration with government websites, they have to individually scrape these sources and create their own datasets, but only in cases where scraping is allowed, industry executives pointed out. Sometimes, they individually ping these websites to check each case.
Multiple startups are coming up with niche business models, by innovating on technology and robust verification algorithms.
“We usually have teams to keep our data banks updated, in some cases we do a website ping as well, but we have automated most of these processes,” Ray said.
Data availability across platforms makes it easier for these startups to create a complete profile of customers.
“If a person rents a house, the landlord may want to run a check to find out if he or she is capable of paying rent on time. Now, if we already have data on the person from an earlier check, it becomes that much more easy for us to verify him or her,” said Varun Mirchandani, co-founder of background verification company HelloVerify.
The requirements for background checks vary from one industry to another.
For instance, ride sharing companies will need to understand if the consumer renting the vehicle has a valid driving licence. To check that, these startups capture details of the customer, and cross-check that with the database of the public vehicles department.
On the other hand, for dating apps an identity validation goes a long way in ensuring genuine users participate on the platform. UK-based digital identification firm Yoti, which works with dating app TrulyMadly, said that such background checks ensure higher safety for women, a major concern in India.
“What is encouraging here is that non-financial services companies are not using our services out of regulatory compulsion, this ensures that our revenue streams are protected from shocks arising out of changes in regulatory environment,” said Tumuluri of VerifyDigital.
Background check startups received a jolt after the Supreme Court prevented private companies from accessing the Aadhaar biometric database for customer onboarding.
Entrepreneurs said that the judgement helped them innovate and expand the scope of their operations.