The curtains have fallen on the year 2023, marking the conclusion of a captivating chapter in the background screening industry. As we bid farewell to the past, it’s time to set our sights on the challenges and opportunities that lie ahead in 2024. Before we set sail into the unknown, it's helpful to analyze the trends that have shaped our journey so far.
In our recent webinar, “Get Ready for 2024: Uncovering 2023’s Background Screening Trends and What Lies Ahead”, our panelists Vince Brodt, Marco Piovesan and Nick Fishman shared their key learnings from last year. Let’s dive into the trends our panel of industry experts explored.
Psst... this post is a summary of their insights- you can watch the on-demand webinar for free here (you won’t regret it!)
Economic Challenges and Opportunities
As we’ve been predicting, poor economic conditions set in and never relented. While predictions about the future remain diverse, there is cautious optimism as we anticipate potential interest rate cuts and positive signs in inflation trends. The stock market's performance and discussions around potential business opportunities indicate a glimmer of hope. However, uncertainties like geopolitical issues and the upcoming U.S. election will keep us on our toes. 2024 demands a vigilant stance from the industry - adaptability and strategic planning are more important than ever. Chief Revenue Officer, Marco Piovesan, advises, "Listen to some of the publicly traded CRA investor calls. They can provide valuable insights into the industry's pulse, helping you stay informed about market trends and the overall health of the economy.”
Despite uncertainties tied to hiring, unemployment, and market dynamics, it’s important to focus on what can be controlled to ensure your organization will survive and even thrive.
Consolidation Creates Opportunities for the Middle Market
Within the background screening realm, consolidation has emerged as a prominent theme in recent years. Chief Marketing Officer, Nick Fishman emphasized in the webinar, "The middle market is always going to be important,” and the merging of larger companies creates opportunities for middle-market players to thrive. “Currently, there are very few providers in this middle market, which presents a tremendous opportunity for smaller organizations to grow,” Fishman explained.
Consumer Reporting Agencies (CRAs) that wish to take advantage of the opportunities consolidation creates must strategically position themselves. By prioritizing elements such as meticulous strategic planning, insightful forecasting, and talent acquisition, CRAs can prepare themselves to capitalize on the dynamic industry landscape. As the industry undergoes transformative shifts, those who proactively prepare to seize opportunities may emerge as the next middle market leaders or attractive targets for mergers and acquisitions.
Industry Evolution
The landscape of background screening is evolving rapidly. Vince Brodt, Executive Vice President of Sales & Strategic Accounts, highlighted a few of the more significant themes observed in 2023:
- The conventional peak season appears to be shifting for the vast majority of the industry. August through October was no longer consistently larger than January through March.
- Third-party verifications are on the decline, with approximately 30% or more of the market reducing their orders for verifications due to diminishing returns.
- The industry grapples with challenges related to Personally Identifiable Information (PII) redactions and the impact of Clean Slate laws. Brodt explained in the webinar, “This is the new norm. It’s not an outlier where it’s just one or two states.” It’s important to be prepared to handle these evolving issues going forward.
Supply Chain Dynamics
The supply chain is undergoing rapid consolidation, offering fewer choices for CRAs. While this may limit options, it concurrently presents an opportunity for CRAs to leverage their business volume for stronger partnerships. Traditional vendor management is transforming into collaborative partnerships, encouraging CRAs to explore how consolidation can streamline operations, reduce costs, and foster stronger relationships with fewer partners.
Brodt shared in the webinar, "For CRAs, maybe you feel like you have fewer choices, but on the flip side, some of the best choices are what’s available to you now." The consolidation is not just about limitation but an opportunity to align with strong organizations armed with sophisticated technology ready to fuel growth and success.
As Piovesan sees it, as long as the consolidation has benefits for the industry, it will continue happening. Fishman adds, “I think the consolidation within the supply chain has actually been very positive for a lot of CRAs because it's forcing the consolidated companies to think differently about their business, to be able to provide different services and to understand their clients in a way that you have a supply chain of hundreds or thousands.”
Industry Outlook
The industry outlook for 2024 is intertwined with economic conditions, mergers and acquisitions, new product developments, and the unpredictable nature of volume spikes. Piovesan recommends focusing on prioritizing the quality of revenue, operations, and net income. Adapting to changes, staying in the game, and fostering a culture of continuous innovation emerge as pivotal strategies for success.
Anticipations point towards an active first half of the year in terms of mergers and acquisitions, followed by a surge in volume in the second and third quarters. However, the looming impact of the election cycle in the fourth quarter introduces a level of uncertainty.
Bring It On, 2024!
As we dive into 2024, these identified trends and insights serve as guideposts for CRAs and background screening companies. By remaining agile, innovative, and strategic, CRAs can navigate economic challenges, capitalize on consolidation opportunities, adapt to the ongoing industry and supply chain evolution, and maintain a positive outlook for the future.
The resilience and adaptability of professionals in the background screening industry will undoubtedly shape the trajectory of this year. So… here’s to the new year and the opportunities that lie ahead. Reach out to our team of experts to explore how InformData can help contribute to your organization's success in 2024.
Cheers to a year filled with growth, prosperity, and triumphs!
In our next post, we will share our top tips for CRAs for 2024. Subscribe here so you don’t miss it.
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