Thursday, June 20, 2024

Footprint Raises $13 Million to Automate Consumer Onboarding

Footprint, a company that unifies KYC (Know Your Customer), security and authentication to automate consumer onboarding and reduce identity fraud, has announced a $13 million Series A led by QED Investors. The round included participation from existing investors Index Ventures, Lerer Hippeau, Operator Partners, BoxGroup, Palm Tree Capital and Definition. New investors Neo and Animal Capital also participated.

The funding will be used to double down on the Footprint product, providing the highest fidelity verification for people today and ways to utilize identities within Footprint tomorrow. This includes expanding the breadth and depth of the Footprint offering. Footprint will launch its fraud suite and expand the number and types of identification consumers can use to verify, including credit bureau data, pay stubs and vehicle data. The funding announcement coincides with the launch of Footprint Connections, a tool to connect its customers to each other to leverage the portability created within the platform.

“Core to Footprint is a new philosophy around who fraud and KYC companies should be trying to identify,” said Footprint CEO and co-founder Eli Wachs. “Companies look to screen out bad actors but there are an infinite amount. In a new age of GenAI, fraudsters have even more tools to mass-create an abundant amount of authentic-seeming identities.

“We needed a new approach – one that labels good actors – so Footprint created a centralized network of authentic, de-duplicated identities. Now we can narrow the scope of who is in a pre-vetted field, leaving fraudsters less room to hide.”

Today, product and risk teams at companies face a familiar tradeoff between fraud and friction. In the past, the best way to reduce fraud was to add friction to the onboarding experience, but increased friction may deter some authentic users. By contrast, companies that over-optimized for conversion with lower friction risked higher potential fraud losses over time.

This is because current point solutions are not able to fundamentally address the root problems. Existing backend KYC tools are unable to actively assess behavioral risk – for example, whether a name or social security number was copied and pasted into a form. A fraud detection tool may be able to pick up those red flags, but it has no capability to challenge the user by asking for additional documentation to verify their identity.

Footprint combines these tools in one product, using “components” to unify KYC, authentication and fraud into a single rules engine for account creation and sign-in.

Components are UX elements that can be customized to collect onboarding information. This can include a name, date of birth, address, social security number or document scan. Footprint can dynamically prompt users to collect additional documentation at the time of account creation or when they sign back in. Additionally, Footprint makes identity “portable.” This creates an Apple Pay-like experience for consumers when they visit a second application that uses Footprint, meaningfully reducing friction for companies and users over time.

Footprint is built on several key pieces of technologies:

  • Extensible decision and rules engine connected to large identity datasets, enabling customers to create automatic step-ups to improve verification and conversion rates with no-code
  • Cutting-edge document and selfie verification flow built on native AppClip/InstantApp user experience to create delightful native user experiences and verify the authenticity of the device capturing the document or images
  • Passkeys meant to bind a biometric to PII to prevent ATOs and phishing
  • Powerful vaulting infrastructure powered by AWS’s secure computing environment (Nitro Enclaves), ensuring customer data is collected securely and kept private

Footprint was founded in 2022 by Eli Wachs, a Stanford MBA graduate who has been starting companies since high school, and Alex Grinman, who studied CS, math and cryptography at MIT having previously started KryptCo, a mobile auth company that was acquired by Akamai.

Since launching its enterprise platform last fall, Footprint has seen impressive growth from its customers spanning financial services, auto and real estate. One customer saw Footprint’s dynamic onboarding tool boost its completion rate by over 50%. Another was able to leverage Footprint to catch an extra 3,000 cases of fraud within the first six months. The company has also signed partnerships in banking, including with both Treasury Prime and Apiture.

“The idea of portable identity is not new,” said Alex. “But building portable identity really means creating a rules engine that can run on top of secure vaulting and strong authentication. To me, this level of technology was not economically feasible for a startup to build before the release of Nitro Enclaves, which AWS released at the end of 2020. Meanwhile, the FIDO2 alliance agreed on a standard for private and secure auth–what Apple calls passkeys–in Q4 of 2022. This was the final missing piece we saw coming to let us build portable identity.”

Footprint believes creating the trusted network of verified, portable identities will meaningfully grow the market. Their first productization of this vision is with Footprint Connections, a tool to connect its customers to each other to leverage the portability created within the platform.

Fraud, friction and data breaches represent billions of dollars of losses to companies each year. Companies in the U.S. and Canada spend $61 billion a year on technology for financial crime compliance, with close to 80% of companies seeing KYC-specific costs go up over the past year. Despite this spend, 42 million consumers in the U.S. face identity fraud.

This is somewhat unsurprising when considering the frequency of data breaches – more than 360 million users had records breached in 2023, according to a public data breach tracker created by The Independent. While traditionally banks were the main institution to run KYC checks, the market has grown substantially as more companies move online and face potential issues stemming from fraud and trust. This includes online marketplaces for items such as homes, cars or luxury goods, rental applications and even vertical SaaS companies.

“Sharable identities have been the center of financial services discussions on KYC for over a decade, but technological hurdles and business model flaws have prevented previous attempts from getting traction,” said QED Investors Partner Amias Gerety. “Footprint leverages the latest industry standards with a business architecture that bakes portable identity into its core, while seamless integration puts business users in the driver’s seat on both fraud and KYC performance. We’ve never seen a company whose value prop resonated so well with both early stage fintechs and late-stage enterprise platforms.”

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