As we kick off the new year, it’s that time again where we take a moment to take stock of our industry’s collective achievements and, just for fun, pull out our proverbial crystal ball to peek at what’s in store for 2024. But first, let’s take a candid look back and see how our predictions for the past year panned out. Alongside sharing our forecasts for 2024, we also hold ourselves accountable by examining how our previous year’s predictions fared. Let’s see how our insights measured up!
A new class of integrated identity platforms will emerge as market conditions will push young companies to exit prematurely and incumbents to buy revenue.
Verdict: Too soon to tell
We are currently observing the rise of Integrated Identity Platforms (IIPs), a trend that is poised to accelerate, particularly following the Department of Justice (DOJ)’s decision not to oppose the merger between ForgeRock and Ping.
Integrated Identity Platforms are comprehensive end-to-end identity solutions with capabilities spanning the entire consumer lifecycle, enabled through orchestration and network effects. IIPs boast features that facilitate key consumer events such as registration, login, and transactions, thereby streamlining processes to maximize user experience (UX), enhancing security through a holistic view of the consumer, and simplifying complex multi-vendor technology stacks for enterprises. Propelled by venture capital (VC) and private equity funding, leading identity providers have expedited their product development, creating robust solutions in critical areas like identity proofing, fraud detection and prevention, and authentication/Customer Identity and Access Management (IAM). These funding rounds were significantly influenced by forward-looking revenue projections, which for many vendors depended heavily on sustained and robust growth in new user acquisition and were greatly affected by the overall market conditions.
In the first half of 2023, deal volumes fell by 30.2% compared to the same period in 2022, influenced by macroeconomic factors and lower valuation multiples. However, the latter half of the year saw a significant uptick in strategic merger activities, and some startups chose to cease operations rather than pursue additional funding. Of the 124 deals last year, 11 companies founded post-2018 exited the market in 2023, which is about 8.9% of all transactions. This percentage is notably higher than in 2022, where only ten newer companies (established since 2017) were involved in 226 deals, making up just 4.4% of the total. Looking ahead to 2024, we expect this trend to persist, with larger private and public companies likely to engage in acquisitions or mergers to broaden their capabilities throughout the customer journey.
To enhance user experience (UX), businesses prioritize behavioral analytics and biometrics on their product roadmaps.
Recent studies reveal a growing trend among businesses to prioritize behavioral analytics and biometrics in their product development strategies. This shift is largely driven by the substantial influence these technologies have on enhancing user experience and bolstering security.
Behavioral analytics offer in-depth insights into user interactions, enabling companies to tailor their products in unique ways and predict user behavior more accurately. This analytical approach significantly boosts user engagement and is crucial in detecting anomalies, thus improving security by pinpointing potential fraudulent activities. For instance, fraud detection platforms employing behavioral biometrics can discern whether users are being manipulated during the checkout process by potential fraudsters, or if they are interacting with text boxes in unusual ways, signaling a potential fraud risk.
Our recent Transaction Fraud in e-Commerce Market & Buyer’s Guide revealed that an overwhelming 90% of decision-makers consider a user risk scoring model more effective than a device risk scoring model. This finding highlights a clear preference among merchants for basing their decisions on user behavior analysis throughout the transaction process.
Alongside behavioral analytics, biometrics are transforming authentication processes. Businesses are increasingly adopting these technologies for more secure and user-friendly access, utilizing unique characteristics such as fingerprints, facial recognition, and voice patterns. This shift towards biometric technology not only streamlines the login process but also reduces reliance on traditional, less secure password systems. Research indicates that nearly 48% of buyers are planning to implement passwordless authentication solutions in the next two years favor biometric authenticators. Incorporating these technologies into product development meets the rising demand for seamless and secure user experiences, providing a significant competitive edge in the market.
Small and medium-sized businesses have been the first to implement passwordless solutions, but Big Tech companies will create momentum for widespread consumer adoption.
There’s a growing desire among customers and industry practitioners to shift from traditional passwords to passwordless authentication systems. Liminal’s research reveals that while 87% of authentication buyers haven’t completely moved to passwordless methods, a significant 97% are prepared to make the transition. This scenario opens up a substantial market opportunity for passwordless solutions, indicating a viable path towards a passwordless future. Leading consumer brands like Google have already introduced passkeys, offering passwordless and phishing-resistant security to over 7 billion user accounts. Nonetheless, a more gradual adoption of entirely passwordless solutions is anticipated, with many companies adopting a ‘wait-and-see’ stance to observe how others implement these technologies. The adoption rate is highly dependent on user education, as consumer comfort and familiarity are crucial in authentication-related decisions.
Numerous start-up companies will be founded this year to make the Internet safer for children.
Verdict: Partially True
Although the surge of new startups wasn’t as extensive as anticipated, there was still a notable increase in startup activities focused on online safety for children, a concern that’s growing in the tech industry. These emerging companies are pioneering innovative methods in digital supervision, content filtering, and developing educational tools to foster safe online practices among children. Noteworthy examples include ‘SafeToNet’ and ‘SuperAwesome’. ‘SafeToNet’ leverages AI to identify and filter out harmful content and cyberbullying, gaining significant momentum in the process. ‘SuperAwesome‘, on the other hand, has been developing technologies to ensure that digital content and advertisements targeting children are in compliance with privacy regulations, mirroring a wider move in the industry towards more responsible and child-centric online spaces. The rise of these startups underscores a collective effort in the tech community to tackle internet safety issues, emphasizing the critical need to protect young users in our ever-evolving digital landscape.
In the realm of Digital Identity in 2023, numerous well-established companies specializing in identity verification, biometrics, and proofing are launching products and services tailored for age verification. The coming year will see the enforcement of several age-specific regulations, such as the California Age Appropriate Design Code Act (CAADCA) and the Utah Social Media Regulation Act. These regulations are expected to catalyze the adoption of age verification services. However, a recent study by Liminal indicates a hesitation among roughly 70% of entities planning to implement age assurance solutions within the next two years. This reluctance is primarily due to the high costs and the additional friction these solutions introduce for end-users.
The increasing popularity and use of AI tools like ChatGPT and Midjourney will prompt policymakers to devote more time to its effects on consumer technology
In the past year, the growing popularity and use of AI tools like ChatGPT and Midjourney have drawn significant attention from policymakers, leading to a shift in focus towards understanding and regulating their effects on consumer technology. This heightened interest has sparked numerous discussions and legislative efforts aimed at addressing the complex impact of AI on consumer privacy, data security, and ethical usage. The European Union, for instance, is advancing with its proposed Artificial Intelligence Act, aiming to create a comprehensive legal framework for AI, particularly for high-risk applications in consumer tech. In the United States, similar issues are being addressed, with the Federal Trade Commission issuing guidelines to ensure the transparent, explainable, and equitable use of AI tools. Additionally, various academic and industry-led efforts, including the Partnership on AI, have united leading tech firms and researchers in a quest to foster responsible AI practices. These initiatives underscore a growing agreement among policymakers about the importance of balancing AI’s innovative potential with the necessary protections to ensure consumer safety and sustain public trust in these rapidly advancing technologies.
We won’t have a clear set of winners or losers in the battle for the reusable identity market.
Although regulations such as eIDAS 2.0 gained prominence in 2023, the market for widespread adoption of reusable identities is still developing. We anticipate a steady increase in the adoption of both public and private-led reusable identity models, but a definitive market leader has yet to emerge. CLEAR, one of the most prominent names in the reusable identity space, has ventured into B2B2C applications, notably through its partnership with LinkedIn, to boost consumer engagement. However, the company faces challenges in significantly increasing its CLEAR Plus membership retention, a growth that many, including ourselves, anticipated would be more robust with the adoption of a reusable identity scheme.
Value investing is replacing growth, and we expect to see companies aligning go-to-market and product strategies for strong unit economics, steady revenue growth, and good business practices.
Over the last year, there’s been a discernible shift in investor preferences towards companies exhibiting strong unit economics, steady revenue growth, and solid business practices. This marked inclination for value over growth represents a notable change from prior trends. In response, companies have been adjusting their market strategies and honing their products to align with these evolving investor expectations. This pivot has fostered a more cautious, sustainability-oriented approach in business operations, prioritizing long-term stability over quick, short-term successes. This change in investment preferences highlights the changing market dynamics and a heightened focus on financial prudence and operational efficiency.
What to Expect in 2024
The last year has been a turning point in the tech industry, highlighting the crucial role of digital identity in the continuous journey of digital transformation. What was once seen as an emerging facet in the cybersecurity arena, digital identity has now gained significant attention from a variety of key stakeholders, including emerging consumer platforms, investors, and technologists. Looking ahead, there’s a growing buzz of speculation about what developments the new year might unfold. Keep an eye out for our upcoming predictions for 2024, where we’ll explore what’s to come in the next year.