The Evolution of the Background Verification Industry In the Gig Era

The $100 billion global verification market is due for disruption. Giving candidates ownership of their background checks would make hiring simpler, faster, fairer and more secure.

Background verification is everywhere, from hiring to banking, to apartment rental applications. According to Careerbuilder.com, 72% of companies background check everyone they hire, and a 2012 CareerBuilder study found that bad hires negatively impact nearly seven in ten businesses. There is no statistic for the number of people whose background check led to unfavorable results, but with occupational fraud cases causing a total loss of more than $6.3 billion in 2016 and identity theft reaching a record high of 15.4 million victims in 2016Opens a new window , it is safe to say that background checks aren’t exactly going anywhere. In fact, the global verification market, currently valued at $100 billion, is growing rapidly; in particular, the background check market for gig and freelance and gig market is growing around 12% percent annually¹, but it’s been slow to adapt to evolving market needs.

Any HR, staffing, or hiring executive can tell you that the current background checking process is complicated and cumbersome.  On the backend, it involves manual research and data mining of an assortment of institutions and organizations- from government agencies to private employment records, to professional associations, and so on.  It is a process that invites human error and delayed results, often costing companies productivity and prospective employees income. New companies who have emerged in this space are working to streamline this process through the use of digital tools and interfaces, but they have yet to simplify the end result, especially in a way that meets the needs of a millennial workforce.

The millennial workforce and the gig-economy go hand in hand, across industries. Today, according to Forbes, millennials prefer freelance jobs because of flexibility and freedom of work, and according to Intuit, gig workers are expected to make up 43 percent of the entire workforce by 2020².  If these growth trends continue, half of the U.S. population will be freelancing for multiple companies in 10 yearsOpens a new window ³.  According to economists Lawrence F. Katz and  Alan B. Krueger, 94% of job creations between 2005 and 2015 appears to have occurred in alternative work arrangements aka gig/freelancing work. Freelancers/gig workers will need to complete a background check for each of the various jobs they’re working, and the redundancy of doing them all separately will be overwhelming. Additionally, the repeated cost is unnecessary, the waste of time and resources for both employer and employee will be tangible, and repeated background checks within the current system also incur a heightened risk to the gig-worker giving out personal identifiable information (PII) like social security numbers or tax IDs. 

All of this:  concerns around data privacy, personal security, the need for efficiency and speed, and maximization of productivity are leading us toward candidate-owned verification models.  We believe that the next phase of the verification market will allow the employee package to include a verified identification record, as a substitute for the traditional background check.  It could exist alongside (or in place of) the candidate’s resume and references, and allow them to control the level of information available to prospective employers. 

The need for this is manifesting in a number of public conversations, such as the “Ban the Box” movementOpens a new window .  Nationwide, 33 states and over 150 cities and counties have adopted these “fair hiring policies” that encourage employers consider a job candidate’s qualifications first—without the stigma of a conviction or arrest record.  These policies generally kick-the-can on the background check towards the end of the hiring process.  The problem with that is, at the end of the process if an employer learns of a conviction history, it’s still likely a one-sided story that may shift the employer’s attitude.   Considering that the gig-economy worker has a higher probability of a criminal record, a verified profile would allow candidates to explain or dispute past issues, adding color to what is currently looked at as a binary decision.  It’s in line with shifting stigma but doesn’t cost companies and candidates days or weeks of wasted time.

This type of candidate-centric model can be used repeatedly at a much lower cost to everyone. Vetty’s Verified Profiles live on the blockchain and are kept secure and up-to-date so that companies can access them without the delays, and trust that the data is in fact verified by a FCRA compliant Consumer Reporting Agency (CRA).  They are also more reliable because users will be incentivized to make sure their data is correct, the same way they have an interest in keeping their resume up to date.  Taking the ownness of background checks out of the hands of HR teams or expensive vendors, and putting them into the hands of prospective candidates, speeds up the hiring process saves your team time and benefits the bottom line.  It also invites younger talent who are sensitive to data privacy concerns, skeptical of background checks, and who are likely multitasking on different projects. 

Simply, user-owned verified profiles offer a 21st-century approach to an outdated and burdensome process.  It offers a win-win for candidates and employers, by expediting the hiring process, enabling productivity and delivering accurate data faster and more securely.