London-based startup Onfido aims to bring background checks into the 21st century

When London startup Onfido secured $4.5 million a few months ago, eyebrows were raised. Dianne See Morrison shines a light on the company, which aims to make background checking more efficient.
London-based startup Onfido aims to bring background checks into the 21st century

Background checks may not be the most glamorous of businesses, but for Husayn Kassai, Eamon Jubbawy, and Ruhul Amin, the three founders of Onfido, it’s an industry crying out to be brought into the 21st century.

Venture capitalists think so too. In February this year, the London-based start-up raised £3 million pounds ($4.5 million USD) in a Series A round of funding from Wellington Partners, backers of Spotify and Dropbox; and CrunchFund, investors in Uber and Square.

Onfido automates background checks letting employers and companies electronically vet potential job candidates. It turns out there’s a good reason to do so. According to UK fraud prevention body CIFAS, 63 percent of confirmed frauds in the first half of 2014 were employment application frauds — that is, “serious fraudulent declarations about employment history, qualifications, criminal records and…identity fraud.” Onfido's checks can not just verify a person’s identity, but they can validate education credentials, sniff out criminal records, and ferret out bankruptcies, all from an online dashboard.

By automating a traditionally manual process, Onfido aims to make background checks faster, cheaper, more efficient and accurate.

The idea for the start-up began to take shape when Kassai, now CEO of Onfido, Jubbawy and Amin were in their final year at Oxford University. As graduation loomed, the three began applying for jobs at financial institutions in London’s City — Kassai at Merrill Lynch; Jubbawy at Credit Suisse; Amin at Bank of Tokyo-Mitsubishi UFJ. Each went through a check that took from 2-6 weeks. At the same time that they were hunting down jobs, Kassai and Jubbawy, president and vice president respectively of the Oxford Entrepreneurs Society, were meeting with banks and consulting firms for sponsorship to the society. They used the time to also ask about background checks.

“The recurring themes again and again when we asked about their pain points were turnaround times, compliance issues, cost and transparency,” says Kassai. “We saw that 80-90 percent of a background check is manual. And when it’s manual based you have human-prone errors, so we thought this is an industry screaming out for a technological solution.”

By the summer of 2012, they’d ditched the idea of a City job, and with seed funding of £200,000 from Oxford University’s Saïd Business School, launched Onfido in August 2012. Two years later, they raised another small round of £330,000.

License to Trade

Much like other background checking firms, Onfido started out targeting employers and recruitment agencies, looking at the high-skill, high-risk sectors such as financial services. But then a fellow start-up, the on demand cleaning firm Hassle, approached them. Hassle knew that in order for them to grow their own business, they needed to show that their workers could be trusted. The company had been looking at doing background checks, but wanted to ensure they were done in good time and at a competitive price. A volume deal was eventually hammered out. More sharing economy companies quickly followed suit, including competing on demand cleaning firms Handy and Homejoy.

“We saw that if you automate it, you can reduce cost and therefore the same service becomes accessible to the lower-skilled, high-risk sectors,” Kassai says.

The more Onfido looked into the sharing economy, the more they liked what they saw. PWC estimates that the rapidly growing sector is currently worth $15 billion globally, with a potential to expand to $335 billion by 2025. It is part of an existing workforce trend that has seen the numbers of contract workers, the self-employed, and freelancers continue to rise.

onfido homepage

At the same time, the trusting early adopters of the sharing economy are giving way to more cautious mainstream users. Considering the volume of transactions that now take place in the sharing economy, tales of sharing experiences ending horribly wrong are actually a very small number. But what sticks in the mind and what’s splashed across headlines are the tales of rapists, squatters, drug-fueled parties, and trashed homes.

“Background checks are a license to trade because the 10 percent of risky applicants will just go to the next platform that doesn’t do checks,” says Kassai.

Indeed, some sharing economy companies are exploring a model where applicants pay extra for a more thorough check that they can then put on their profile to signal that they are more trustworthy. Other platforms are requiring that both users and service providers are background checked. Trust is now a way to stand out from the crowd.

Background Noise

As promising as Onfido looks, the startup is not short of competition. Kassai counts six major competitors in an industry that includes several American giants: Sterling Infosystems, HireRight, Experian and LexisNexis. Another tech startup has also hit the scene, the Accel Partners-backed Checkr. The Y Combinator graduate is based in Silicon Valley and recently raised $9 million.

Kassai is unfazed. Onfido has already amassed 400 customers and offers checks across 27 countries in Europe as well as the United States and is looking to expand to 8 more by year end. Kassai believes that Onfido is now the largest provider of background checks for the on-demand and sharing economy sector with a seemingly endless supply of companies that want to be the 'Uber of their space' contacting them.

“Everyday there is a weird and wonderful startup ,” says Kassai. Some of the ones that have stuck out include a yacht-sharing startup, as well as a horse-sharing company — memorable as neither has ever been part of his life. “I’ve never even ridden a horse,” says Kassai, “So horse sharing was quite new to me.”


Moreover, the background checking industry is currently in flux as the processes at traditional companies have come under scrutiny. Earlier this year, Altegrity, the American global player and owners of HireRight and United States Information Services (USIS) declared bankruptcy, spinning off HireRight in the process. The company ultimately cited a “state-sponsored data intrusion” that exposed the personal information of government workers as the reason the US government pulled two contracts that made up 22 percent of Altegrity’s revenues ($304 million in the last 12 months to February 2015).

But being the owners of USIS, the company that bungled the background check of former NSA contractor Edward Snowden didn’t help either. Following an investigation into how Snowden slipped through — vetters failed to follow up on a possible security violation and left some references unchecked — the U.S. sued USIS for pushing through some 665,000 unsatisfactory checks.

Much of the problem with the manual process is that a check is typically handled by a team, with each member of the team chasing a particular reference or verification. Notes Kassai, “My interest as one of seven of the cogs in the team is to tick a box and pass it along; no one is accountable. Everyone was ticking a box and pushing it down the conveyor belt.”

The way Onfido ensures a check doesn’t fall through the cracks is by combining and cross-referencing different checks from a number of different data suppliers from whom they license the data (for example, credit reference agencies, criminal record bureaus, electoral rolls). A first check might start with an identity check - the person is who he says he is. Onfido then combines that with a document check to ensure the identity hasn’t been stolen. They can continue to cross check and corroborate with other data until a much more layered view of the applicant emerges. “The issue is being smart about the cross-reference,” says Kassai. “The aim becomes looking to find reasons to capture risky applicants as opposed to ticking a box for compliance purposes, that’s the core difference.”

Kassai is also confident that they’ve got a decent lead on other tech startups who would need to get the same three things right: fast turnaround times, competitive pricing, and accurate checks. “Looking at turnaround times, the more we’ve integrated with data suppliers the faster our turnaround times.

When you look at offering the most competitive prices, the higher our volumes, the lower our data costs, the lower our prices. As for robust checks, we have technology that we’re refining all the time. You need a lot of data integration to do this, so it’s increasingly difficult for others to catch up.” In short, Kassai believes Onfido is first to market with a tech-heavy product that can’t be replicated overnight.

Check Mate

Certainly, Onfido’s investors are ambitious for the company. Wellington Partners’ Stephan von Perger says that the company is building a “stand-alone player that dominates,” and sees no reason that they may one day move beyond the sharing economy and up the stack from high-risk, low-skilled workers.

“Right now the focus is on the sharing economy because the growth in the underlying sector makes sense,” says von Perger. “Startup cycles are shorter so integration is faster. But as the product becomes more robust and these guys prove they are absolutely legit, there’s a huge opportunity to come back to larger corporations.”

Kassai says the focus now aside from expanding geographically, is to ensure they are constantly refining the product and perfecting the checks. “The more data we have the better the checks, and the more checks we do the better the checks.” One thing is certain, any feature based on predictive analysis won’t be part of any new offering. Customers have asked about it, wanting to know if Onfido could one day offer some sort of product that could indicate the likelihood of strong performance in the job or even criminal behaviour in the workplace based on the background data amassed on an individual.

“That is not our job. That is not where we want to go,” Kassai says emphatically, “The last thing we want to do is to develop something that is prejudiced or that predicts something based entirely on what’s happened in the past. Maybe you reformed today, so you should have a chance. You shouldn’t be banned for life , but you should be honest what you’ve done…we don’t make the judgement calls, the employer still has to make that call.”

Featured image credit: AVN Photo Lab / Shutterstock

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