Identity Intelligence is Critical to Cybersecurity in Ever-More Digital World
Businesses offering identity-intelligence solutions may offer considerable opportunities to investors as much of our day-to-day activity moves online.
July 20, 2021
Identity verification is critical to cybersecurity, but the digital world is far past the days when merely a username and password were enough to verify someone’s identity. The limitations of these traditional credentials became apparent last year when so much of our day-to-day human activity transitioned to digital, rather than physical, interactions in response to the COVID-19 pandemic. As our lives and businesses moved online, so did the criminals. An astonishing $4.2 billion was stolen from U.S. consumers via online crime in 2020.1
New data-driven approaches to answering the question “who are you?”—known collectively as “identity intelligence”—are needed. Mark McGovern, Venture Partner at Sands Capital, presented on “Cybersecurity and Identity Intelligence” in June at the Private Markets Virtual Series, hosted by Pensions & Investments. As McGovern noted, 81 percent of cybersecurity breaches involved compromised login credentials or abuse of user accounts.2
Analyzing Patterns is the Key to Identity
To verify identities more effectively, merchants and cybersecurity teams need to analyze the underlying patterns of a user’s online interactions. As McGovern explains, how we identify and verify users online needs to mirror how we do it in real life. Humans recognize and analyze details when we interact with each other, and we use that information to make decisions. Online identity-intelligence systems are evolving to do this. They are examining factors such as the type of browser and device used, the products or content viewed by a user, the IP address for the activity, and where geographically the user is logging in from to determine if these behaviors are consistent with the user’s past behavior. In the case of an ecommerce website, you can also analyze whether the purchased items are consistent with what that account has bought or viewed in the past. All this information can be consolidated and analyzed to determine whether a specific online interaction seems legitimate or suspicious, and then delay or speed acceptance of the payment appropriately.
Importantly, these behavioral patterns can improve the overall user experience for customers, in addition to enhancing security. For example, identity intelligence can speed up onboarding and enable better customer support, as well as enabling companies to personalize the types of product recommendations they surface for a user. In these ways, identity intelligence can help increase efficiencies and margins for businesses.
An Ever-Expanding Market and Investment Opportunity
For investors, companies offering identity-intelligence solutions present a considerable opportunity. The scale of online activity—4.6 billion users have access to the internet daily—shows the growing need for identity-based security and intelligence. But it is not only people that are driving online activity. The internet of things (IoT) connects cars, household appliances, and our entire infrastructure to the internet. There are already 10 billion internet-connected devices; that number may triple in the next few years. Each of these devices has an identity, and their interactions pose security challenges that must be addressed.3
The need for identity intelligence spans industries from banking and ecommerce to national security and government, and use cases such as verifying payments, ensuring cryptocurrency transactions, managing supply chains, and authenticating access to applications. It even includes the tools and solutions to ensure user privacy and compliance with new regulations. The broad nature of both the use cases driving demand, and the customer base buying identity-intelligence solutions provides resilience to the industry. This year, the market for cybersecurity and identity intelligence is expected to hit $150 billion, with 12.4 percent year-over-year growth.4
Cybersecurity and identity intelligence is a competitive market that’s growing and resilient. It offers considerable potential for investors who understand the market’s unique dynamics, the technology, and the innovation that’s driving its growth.
1 FBI – FBI internet Crime Report 2020 – https://www.ic3.gov/Media/PDF/AnnualReport/2020_IC3Report.pdf
2 Verizon Data Breach 2021 report
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