Munich’s IDnow aims to go global with its digital identification technology, despite legal hurdles

Munich’s IDnow knows a thing or two about timing. The company was founded in 2014 to tackle the issue of remote digital verification and electronic signing in an age where mobile banking and fintech services are swelling in numbers.

The timing was just right because regulators had begun loosening the reins a little, as Sebastian B?rhold, managing director of IDnow, explained: “The BaFin [German financial supervisory authority] allowed a video identification method for KYC, which has been rolled out across Europe since then.”

IDnow’s technology is used by various sectors but finance has been the most prevalent use case, where banking customers can verify their ID remotely through their smartphone for processes like opening a bank account.

The company hasn’t disclosed how much funding it’s raised to date but it closed a “several million” euro Series A round late last year from investors including Seventure, BayBG Bayerische Beteiligungsgesellschaft, and a number of business angels.

Once again, this step forward came at an opportune time for the company as it prepares to build out its business and expand into more markets and sectors. At the same time, BaFin laid out fresh rules for using video identification for opening bank accounts online. Whereas as this verification process has been valid since 2014, banks are now required to record the entire video process and secure it through end-to-end encryption. Companies like IDnow would have to pump more money into ensuring they’re compliant.

While there’s a noticeable increase in the number fintech services, there’s a growing need for security and identification solutions as well. This has presented IDnow with a significant opportunity as its technology is currently deployed with 150 different banks and institutions.

They are not without hefty competition though – and have had to take measures to stick out from the pack.

In 2016, the Munich company was granted an EU patent for its video identification technology, originally applying for it in 2013 before the company was even officially founded. It’s a pretty straightforward process for protecting your intellectual property and IDnow hasn’t hesitated to enforce that patent.

The company had anticipated that its competitors may likely violate this patent, said B?rhold. This led to IDnow taking a patent lawsuit violation against fellow German ID tech company, WebID Solutions, which also develops and sells tools for confirming customers’ identities.

“In our view, there was no way to solve that in a cooperative way. That’s why we decided to file for a patent lawsuit,” said B?rhold. In August, it got a significant win when the District Court of Düsseldorf ruled in its favour, but WebID intends to appeal as it disputes the findings of the case and what it calls a “false interpretation of the IDnow patent”.

“From our point of view, the IDnow’s patent clearly is of no value,” the latter company told Tech.eu in a statement; they believe the patent will be revoked eventually. Time and legal wrangling will tell.

It’s a hurdle that IDnow thought it had left in its rear-view mirror. Taking the case had eaten up a lot of costs and resources, which could have been invested in the company’s ongoing internationalisation strategy. However, they’re not deterred.

“The next step is definitely to move more international. We have a lot of international customers already,” said B?rhold. IDnow has a number of clients in France, Portugal, Austria, and Switzerland, and its European expansion plan will also entail opening more offices around the continent to better serve clients.

“Then on the other side, [we will] expand our product portfolio; next to the video product we have we introduced an e-sign solution which is very well-suited for the financial services industry,” said B?rhold.

Now the company wants to develop a “lighter weight product” for other markets and other industries as well as finance. This may also require some regulatory jostling as the German company adapts its products to each market or the requirements of different industries.

“At the beginning it was a lot of regulatory work, and we still continue that work in other countries,” said B?rhold.

“For now, we are really focused on Europe because we think that the European market for the next one to two years is definitely big enough to capture,” he explained. “Since the regulation in the US is a bit different, we would rather look towards Asia for our next internationalisation step.”

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