Liveness Detection

Outside-in Report

© Liminal Strategy Partners, LLC | Privileged and Confidential | October 2021

Executive summary
Rising consumer adoption of digital onboarding and passwordless authentication will drive demand for biometric solutions;
fraudsters are becoming more sophisticated in their attacks, requiring vendors to implement liveness to increase assurance

Overview and Considerations Notable Players

§ Facial liveness detection: Liveness detection is a component of facial

recognition technology that can detect the live presence of a user to thwart
spoofing attacks

§ The rise of eIDs will lead to widespread adoption: Global eIDs and biometric
passport initiatives will require high verification standards. This can be seen in
both developed and developing areas; 22 of 54 African nations currently offer
biometric passports1

§ Banking to fuel industry growth: Growth in the market will also come from Features
financial services and payments; Liminal’s market projections expect biometric
solutions to see a 33% CAGR through 2025 across online banking1 § Motion detection
§ Image processing
§ Sizeable and growing market opportunity: The global biometrics market TAM § Facial mapping
is $22 billion in 2021 and is expected to grow at a CAGR of 13% through 20251 § Powered by datasets and AI
§ On-device flexibility
Primary Use Cases
§ Customer onboarding
§ Mobile payments
§ Social welfare benefits
§ Account recovery
§ Online prescription orders

§ Threats from Big Tech: The tech giants are continuously expanding their
biometrics-verification capabilities (e.g., Face ID for Apple Wallet); however, their
business models typically restrict their ubiquity across the market, resulting in
sizable opportunities that liveness detection vendors can penetrate

Liminal Outlook

Technological evolution has given way to rising fraud and identity theft, especially as the COVID-19 pandemic has forced many industries to speed up their digital agendas.
With more activities now conducted remotely, identity verification with a liveness detection layer has become crucial in ensuring that it is the right person behind the screen.
We expect to see particularly high demand from entities in higher assurance industries, as well as those that face higher potential for fraud loss

1. Liminal market projections

© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021
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 Facial recognition is a biometrics technology that identifies or confirms an
individual’s identity based on facial features.

Liveness detection is a component of facial recognition and is the ability to

detect the live presence of a user, determining if he / she is a real person at
point of capture, or simply a fake representation.

© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021 3

Facial liveness technologies have three key defining considerations
There are three important criteria that facial liveness technologies share, including a focus on combatting 2D or 3D presentation
attacks, having either active or passive modes of deployment, as well as using either a single-frame or multi-frame approach

Ability to combat 2D and 3D attacks Active vs. passive deployment Single-frame vs. multi-frame

Presentation attacks that enable identity fraud can
come in 2D form (e.g., static photograph, dynamic
video replay) or 3D form (e.g., static mask, dynamic
robot). Liveness detection is specifically used to
combat such spoofing techniques
At a high level, facial liveness detection is deployed in To determine liveness, a single-frame approach (e.g.,
two ways: active (e.g., requires user participation) or one image) or a multi-frame approach (e.g., sequence
passive (e.g., requires no user action), each of which of images) is typically employed vis-à-vis users’ front-
has differing effects on friction and time-to-result facing device cameras

© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021

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Key characteristics of facial liveness detection technologies
Looking at today’s facial liveness detection technologies, there are five specific features that differentiate market players; these
include their technological capabilities as well as their ability to synthesize results quickly and accurately

Feature Description Key Considerations

Motion detection determines a person’s live presence. Active motion

Motion detection
(active vs. passive)
Correlates to friction and abandonment rates: Active liveness checks
detection requests a person to perform a specific action whereas
generally require user participation, so are often seen as higher friction and
passive motion detection runs in the background as a means of
more susceptible to higher customer drop-off rates
‘passive authentication’

Image processing
(single frame vs.
multi-frame)
The image analysis process that liveness technology relies on is either
single-frame (e.g., selfie) or on multi-frame (e.g., sequence of images /
video frames)
Relates to active / passive modes of deployment: Active checks tend to
require multi-frame approaches to detect liveness, whereas passive
checks can employ a single-frame approach to process in near real-time;
the difference can affect user experience and time-to-result

Differs in fraud prevention ability: Studies show that 3D technologies

Facial mapping Liveness detection technologies can differ in terms of 2D (i.e., flat) or generally pull on a lot more data points than their 2D counterparts,
(2D vs. 3D facial 3D (i.e., contour and depth) facial mapping deployment suggesting that liveness technologies with 3D facial mapping techniques
recognition)
are more sophisticated and accurate

Powered by Quality and quantity of data matter: Volume, reliability, legitimacy, and
AI techniques like machine learning or deep learning are combined with
datasets and AI comprehensiveness of datasets combine with AI techniques (e.g., machine
public and private datasets to build liveness technology
technology learning) to build and train liveness technologies

Opportunities in emerging markets: With liveness checks that can be

On-device Liveness checks performed directly on-device can reduce the need for flexibly deployed on-device, businesses will be more able to expand into
flexibility additional software installations and high bandwidth requirements emerging markets, where mobile penetration is growing amongst end-
users, but are still lagging in infrastructure and bandwidth capacity

© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021

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Liveness detection technology works in accordance with the identity verification process
Regardless of how they are deployed, all liveness detection technologies function as an extra layer of security, detecting and
eliminating bad actors from the identity verification process
Facial recognition without liveness detection

Confirmed Not Confirmed

Match face to
User goes to onboard / User takes selfie or User’s biometrics
authentication token or
authenticate uploads a photo accepted or rejected
photo ID

Facial recognition with liveness detection

Additional assurance

Confirmed Not Confirmed

User takes a selfie Match face to

User goes to onboard / Vendor assures for User’s biometrics
+ active check authentication token or
authenticate liveness of the individual accepted or rejected
(e.g., head nod) photo ID

© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021

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The opportunity map is characterized by assurance level and potential fraud loss
Market opportunities exist in industries that sit in the mid to high assurance levels, as well as those that have a high potential for
online fraud loss, such as financial services, payments, government services, and marketplaces
Market KPIs
§ Assurance Level: An industry’s assurance level corresponds to the amount of
Opportunity security that is needed to prevent fraudulent identity attacks; high assurance
industries can benefit from added protections offered by facial liveness checks
High

Financial § Potential Fraud Loss: The higher the potential for consumer-related fraud
Government loss, the greater the need for multi-layered counterstriking methods like facial
Assurance Level (Ability to Prevent Spoofing)

Travel Services +
Services liveness detection
Fintech

Opportunity
Marketplaces +
Market Opportunity
Healthcare Sharing Payments § Government opportunities: Governments globally are instituting biometric
Economy programs which should require liveness to provide access to services; 22 of 52
African national are launching biometric passports and 100 million Brazilians
have already had their formal biometric identities created1
Gambling, Age-Restricted Crypto,
Gaming eCommerce Insurance § Financial services growth drives opportunity: Since the onset of COVID,
banks have seen a 200% increase in the amount of mobile and online
registrations, driving the need for efficient and secure onboarding solutions1

Liminal Opportunity Map Outlook

Education eCommerce
Low

As consumers move towards mobile and / or remote onboarding processes, we

can expect that the facial liveness detection market will benefit from upwards
trajectory. Growing demand should come from industries sitting near the
Low High intersection of high assurance and high potential fraud loss, as they pose the most
Need for Fraud Detection and Prevention
to lose from cyber and spoofing attacks
1. Liminal Link Research
© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021
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Existing vendors have penetrated many of the key market verticals
There is high viability for facial liveness detection across industries that have high customer onboarding requirements and benefit
from additional fraud protections to detect fake/non-real faces on top of biometric-based identity verification
Opportunity Description
Financial Financial institutions require secure
Services & solutions to fulfill KYC/AML obligations;
Fintech COVID-19 has increased reliance on eKYC
which requires remote proofing
Payments Rising fraud means that payment players
will seek to mitigate risks by implementing
more robust onboarding processes
Government Many governments are already comfortable
Services with adopting biometric solutions as a
method of verifying/authenticating civilians
and as part of new eID initiatives
Healthcare As digital health and telemedicine become
more prevalent, the high friction industry will
need secure methods to identify patients
Marketplaces & P2P marketplaces require trust on their
Sharing platforms, not only at onboarding but for
Economy each physical interaction that a user may
perform via an online platform
© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021
Considerations Notable Players
Part of high assurance onboarding: Facial
recognition and liveness detection technology are
part of stringent verification procedures that many
institutions have already implemented
Must balance fraud with customer UX:
Payments companies face high customer
abandonment during onboarding; requiring
incentivization to avoid customer drop-off
Forced adoption: While there is a general distrust
of governments to store/manage PII, some
governments have instituted compulsory biometric
onboarding, which leaves citizens little choice in
their preference for adoption
Patient misidentification: Potential medical
fraud-loss or patient misidentification risks can
impact quality care, making this a viable vertical for
patients receiving remote healthcare
Trust & Safety a major priority: Additional
verification methods including liveness can help
prevent P2P fraud and crime across ride-sharing,
apartment-sharing, and gig economy services
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Use cases exist in customer onboarding and authentication in high assurance verticals
Facial recognition and liveness detection technologies can be applied in several ways, ranging from more commonly seen cases
in customer onboarding, to more recently popularized scenarios like fulfilling online prescription orders
0-po;l./ Use Case Features Pain Points
KYC at customer onboarding High friction process: Businesses
carry out time-consuming and costly
KYC procedures, leading to high
customer abandonment rates
Mobile payments Sophisticated hackers: Malicious
actors now have more opportunities to
carry out identity fraud attacks (e.g., SIM
swap attacks)
Social welfare benefits Welfare fraud: Fraudsters have been
able to extort weaknesses and steal
people’s identities to access benefits
that they otherwise would not quality for,
including COVID-19 unemployment
Online prescription orders Vulnerable digital infrastructure:
Forced digitization during COVID-19
opened doors for prescription fraud and
unauthorized access to controlled drugs
Account recovery and account Circumventing identity verification:
takeover Sharing economy platform users can
bypass initial verification processes,
loaning a car to a friend or third party
© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021
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Description Causes
Strict regulations: Many regulators
around the world have implemented
geo-specific KYC guidelines
Smartphone penetration: Mobile
devices are increasingly used to replace
credit cards, translating to higher
volumes of online purchases
Weak existing infrastructure: Digital
uptake across industries has broadened
online data availability, and COVID-19
has exposed government infrastructure
unequipped for pandemic volumes
Healthcare is a traditionally lagging
industry: The industry is siloed due to
patient privacy laws (i.e., HIPAA) and
reliant on outdated record-keeping and
patient verification methods
Static verification: Scanning ID
documents and comparing a static selfie
is not fail safe in proving the life
presence of a verified individual
Solutions
Considerations
Faster and fewer data points: Secure
eKYC solutions now exist, which
leverage users’ digital footprints to
reduce friction and paper-based process
Better verification methods: Facial
liveness detection that run on device
cameras can ensure that the real and
right person is making the purchase
New tech and digital IDs: Governments
have started to adopt facial liveness
technologies as well as eIDs to ensure
that only those who are eligible can
receive benefits
Remote patient identification:
Healthcare players are incorporating
new, mobile processes to ensure that
only the correct patients have access to
authorized prescriptions
Adaptive Authentication: Ongoing, risk-
based authentication provides additional
security at login beyond username,
password, and device authentication
The demand for biometrics is rising; however, critical challenges remain unsolved
Rising demand for passwordless authentication solutions coupled with an increase in fraud will drive the market demand for
biometrics; however, progress may be threatened by concerns over potential for biases and impacts of digital exclusion
Headwinds and Tailwinds

1 Tailwind: Passwordless Authentication demand: Most data breaches are

caused by compromised passwords. Businesses, customers, and identity
verification providers are therefore starting to acknowledge that passwords are
no longer a sufficient authentication method

Tailwind: Rising threat of fraud: Fraud has exponentially increased over the
1 2
past few years, leading businesses to drive demand for facial liveness
technologies that can help them securely verify customers without imposing
4 additional user friction

3
2 3 Headwind: Bias concerns: There has long been concerns over biases within
AI-operated biometric technologies, especially as they can lead to accuracy
gaps related to age, gender, skin tone, and more

4 Headwind: Hardware limitations: Many current solutions require high-quality

Deterministic Data
first party data, attributes known to be true mobile devices. These solutions are not optimized for other hardware types
(e.g., desktop) and run into challenges in developing areas of the world where
Probabilistic Data
predicted data, based on relational patterns the phones and corresponding cameras may be lower quality
Self-Managed Data
individual attested data

© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021

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Experts seem to have similar sentiments about the liveness detection market at large
Leading senior executives across identity acknowledge the benefits that liveness detection technologies embody; although, they
have noticed the market’s lack of product differentiation, pricing compression practices, and potential threats from Big Tech
Expert General Commentary
“My perspective on biometrics technology has
changed over time. I was initially hesitant to
Eric Woodward do anything related to it because of Big
Senior Advisor, Socure Tech’s dominance, but I’ve learned over time
that biometrics has a lot of value and great
market opportunities, like government"
“I am personally shocked that there is not
even more competition in the liveness
Darren Bassman detection space. Our vendor choice was
CEO, Microblink largely driven by pricing, as well as where we
saw useful expertise”
“When it comes to guaranteeing a person is
who they say they are, facial recognition and
Bill Spruill liveness check technologies are wonderful.
CEO, GDC They are the next best thing to actually doing
so in-person”
“There are a lot of challenges behind building
an in-house liveness detection product, and
Adam Perold this can vary depending on how sophisticated
CEO, Element you want it to be. The first 70% is easy, but
the difficulty curve really steepens from there”
© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021
Position on Solutions
“Liveness detection and facial recognition
technologies have gotten much better and
easier. If not for the extra cost, I would not
even think of them as step-up authentication
methods anymore”
“From my understanding, single-frame
liveness offerings are just not good enough.
We do not want to partner with solutions that
are less than what we or the market want”
“Friction from active liveness checks tends to
diminish the technology’s overall value.
Consumers want processes to be as smooth
as possible, so any small amount of friction
can lead to a measurable drop-off – not just
from bad actors, but the good ones”
“Right now, most solutions in the market are
not excellent, and the best stuff is just okay”
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Position on the Future
“Big Tech companies are continuously adding
features around biometrics, so will always be
seen as threats. At the same time, if people
were really worried about Apple or Google’s
dominance, then we wouldn’t be seeing so
many investments into new vendors”
“The hardest thing is to find high quality and
volume of datasets to train the liveness
detection technology on. A sizeable amount
of data, time, and money are needed to build
this in-house. Whoever cracks the code to do
it all will have pricing power”
“At the end of the day, vendors will need to
differentiate themselves based on accuracy of
their tech algorithms, as well as time to result”
“There will be a lot of price risk because the
solutions are easily interchangeable. We’re
seeing more vendors try to build more robust
and sticky products, making it hard for
customers to switch even if competitors
undercut them"
Liminal’s outlook on the facial liveness detection market
While the facial recognition and liveness detection market is currently dominated by a few select players, we do expect growing
demand to be met by new suppliers over time, some of whom will offer differentiated products that eliminate price compression

Thesis Commentary Overall Outlook

There are problems today Facial recognition and liveness detection technologies can act as an added security layer We believe there is strong demand for
that facial recognition and against anti-spoofing and fraudulent attacks that are present across almost every single facial recognition and liveness detection.
liveness detection can help industry, the strongest opportunities exist in government, financial services,
solve Fintech, payments, healthcare, and eCommerce Current supply in the market is being
1
met by a select few solution
There is long-term demand The market TAM for biometrics is $22 billion in 2021 and rising at a 13% CAGR . providers, whose facial recognition and
for facial recognition and Key use case opportunities exist across account opening, payment initiation, account liveness detection products are
liveness detection takeover protection, access to government services, and prescription drug refill relatively similar and interchangeable.
As a result, there is price compression
The market for facial Relatively low barriers to entry, minor product differentiations, and strong in the market
recognition and liveness competition have led to price compression in the biometrics market. Businesses go
detection is elastic for the solution that is deemed the “best bang for their buck,” translating to cheap and fast Companies focused on facial
recognition and liveness detection
We expect to see Challenges from Big Tech and price compression will lead to near-term consolidation in should look to differentiate themselves
consolidation in the the biometrics market; we expect to see market activity and consolidation in the next by developing a low-to-no friction
biometric market 12-18 months product that can accurately detect
spoofing attacks as quickly as possible
We expect to see
companies focused on facial Digital transformations taking place across enterprise-related verticals will open-up To expand market presence, vendors
recognition and liveness windows for more cybercrime and fraudulent attacks. This is particularly salient for those must secure customers across financial
detection to sell to with high assurance use cases yet face high potential for fraud loss services, Fintechs, governments,
enterprises healthcare, and eCommerce

Notes: Liminal Link Research & Market Sizing

© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021
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© Liminal Strategy Partners, LLC | Privileged and Confidential | December 2021