Focus: Spending to fight U.S. unemployment fraud brings boost, scrutiny to Alphabet-funded ID.me

Pexip Holding ASA

22/07/2021 13:30

By Paresh Dave and Jeffrey Dastin
    July 22 (Reuters) - An unprecedented number of people
falsifying identities to claim U.S. jobless benefits during the
pandemic sparked a surge in government spending to curtail the
fraud, creating a fierce new battle in the identification
business. 
    No company may be benefiting more than ID.me, founded in
2010 as a Craigslist for verified military veterans and valued
at $1.5 billion in financing this year by funds including
Alphabet Inc's  GOOGL.O  CapitalG. 
    ID.me in a year has gone from vetting unemployment claimants
in zero states to 27, to help address what the U.S. government
said could amount to $87 billion in improper unemployment
benefits payments during the pandemic.
    Many of those states have exercised "emergency" or
"sole-source" exemptions to skip getting competing bids,
according to records Reuters reviewed from 11 agencies.
 urn:newsml:reuters.com:*:nL1N2OO2FZ 
    The fast growth is now attracting scrutiny from an
industry-backed watchdog group into whether a national
association may have unfairly steered business to ID.me. It also
led to delays for some benefits-seekers, according to ID.me's
chief executive and seven former workers who spoke with Reuters.
    
    The former ID.me workers said that non-English speakers, the
elderly and people of color sometimes waited days for
verification because the company lacked multilingual agents.
They added that sometimes users struggled with glitchy video
conferencing from Pexip Holding ASA  PEXIP.OL , and said some
Black applicants were wrongly flagged by the company's
fraud-detection software. 
    Workers had to verify at least 30 people per eight-hour
shift and could wait no more than six minutes for users to
respond or solve tech issues, said the sources, including former
contractors Carlos Moran, Russell Schwartz and Valerie
Blankenship. 
    ID.me CEO Blake Hall told Reuters that language support is
expanding, and said the company forewarned states about waits
and they never extended beyond a day.
    "This is a crisis situation. There were no good choices,"
said Hall, a former Army Captain.  
    Hall added that Pexip offers strong security, and that
industry-standard "efficiency targets" did not apply to
troubleshooting. Pexip did not respond to comment for this
story. 
    With at least some issues addressed, investors are bullish
that the McLean, Virginia company is joining a long list of
internet services emerging from the pandemic as essential tools.
    Market researcher Juniper expects global annual sales of
online identity verification services to reach nearly $16.7
billion in 2025, up 77% from this year. 
 
    ID.me, which has nearly tripled to over 50 million users
since last March, wants to let them enter the same email and
password combination to log into tax or Social Security
accounts, download mobile keys for hotel rooms, or prove they
are a veteran, nurse or teacher to secure e-commerce deals.
    It envisions "Sign in with ID.me" buttons on apps alongside
"Sign in with Apple" and "Facebook Login." 
    "There's a huge identity opportunity because there's no
national identity system," said Jesse Wedler, a partner at
CapitalG. "ID.me has this out-of-the-box solution."
    
    SELFIE CHECKS
    ID.me's automated verification technology analyzes evidence
and records, including comparing users' selfies with pictures
they take of their driver's license or other identification. If
that fails, users can show additional documentation on the video
chats with ID.me's "trusted referees https://pages.nist.gov/800-63-3-Implementation-Resources/63A/referees.
" It saves selfies as another dataset to check against later.
    With COVID-19 closing state offices and boosting identity
theft, officials saw value in face checks and video chats. A
federal law passed last December also required identity
verification for aid. ID.me struck its first deal last June with
Florida. About 15% of unemployment claimants have needed video
chats, Hall said.
    
    Arizona credited ID.me for reducing fraud and ensuring
timely benefits delivery. New Jersey described ID.me as "a
tremendous asset," and California called it the best of 12
vendors it considered, including Adobe Inc  ADBE.O  and DocuSign
Inc  DOCU.O .
    Rivals, including Relx Plc's  REL.L  LexisNexis, which
itself went from serving 11 states to 21 during the pandemic,
say failed selfie checks needlessly delayed payment to millions
of jobless people. They contend that most Americans can be
verified without photos by just checking against device
information, credit histories or property and utilities records.
    Hall for years has said that approach disadvantages recent
immigrants, lower-income families and others with what the
industry calls "thin files," forcing them to verify offline.
    Competitors view his concerns as outdated. But they do not
offer video appeals, through which ID.me has verified 1.24
million claimants, Hall said. No state has canceled it.
    Thomson Reuters Corp  TRI.TO , the parent of Reuters News,
offers Pondera software, which spots suspicious patterns among
applicants and is being used in seven states including
California and Nevada. For a FACTBOX of players in the space,
click  urn:newsml:reuters.com:*:nL1N2OO2FZ
    
    'ENDORSED ID.ME'         
    But lawmakers and taxpayer advocates have begun to
scrutinize whether ID.me was the best choice to handle the
influx of users.
    The IT Acquisition Advisory Council said it wrote to
officials including the U.S. Department of Labor's inspector
general that the influential National Association of State
Workforce Agencies (NASWA) may have interfered with
open-competition requirements by recommending ID.me to the
exclusion of others.
    North Carolina said in its sole-source waiver that NASWA
"endorsed ID.me," Pennsylvania cited NASWA guidance in its
selection process and Washington state received $177,500 from a
NASWA affiliate to try ID.me, records show.
    NASWA and Hall denied any endorsement, saying the group
facilitates information sharing about tools but does not
preference any. The states did not respond to requests for
comment. The inspector general declined to comment. 
    Contracts and payments obtained by Reuters for ID.me
services in 16 states collectively are worth at least $29
million. The company says its overall annual recurring revenue
is $150 million.
    "You'll start to see some oversight hearings for sure: What
are the pitfalls we saw during an extreme, high-pressure time
and what are the guardrails we need?" California State
Assemblywoman Lorena Gonzalez told Reuters. 

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
ID.me verifies most users without video calls    https://tmsnrt.rs/2UPBpE3
Wait time falls for speaking to ID.me referees    https://tmsnrt.rs/36Q9S8B
ID.me's users surge amid unemployment deals    https://tmsnrt.rs/3ra58Us
FACTBOX-States using ID.me, rival identity check tools for
jobless claims     urn:newsml:reuters.com:*:nL1N2OO2FZ
FACTBOX-Five ways fraudsters try to claim U.S. unemployment
benefits     urn:newsml:reuters.com:*:nL1N2OT02Y
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Paresh Dave; editing by Jonathan Weber and Edward
Tobin)
 ((paresh.dave@thomsonreuters.com; 415-565-1302;))