Put yourself in the shoes of an employer. Would you be able to tell the difference between one criminal background check provider and another? And if you could, would it matter?
According to industry analysts, there are over 2,000 background screening companies in the U.S. market. The industry has grown nearly 5% over the last five years, exceeding $3 billion in value.
On the one hand, this is great news for Consumer Reporting Agencies (CRAs). Demand for background screening services is high, powered by a low unemployment rate (until very recently), workforce churn and evolving work culture.
Younger generations of workers are much more likely than their predecessors to make frequent job switches (churn). Meanwhile, the rise of the “gig economy” has brought with it a tremendous bump in the percentage of contingent or non-traditional workers in the workforce. These gig workers represent an increased risk to employers, and therefore, have spurred companies like Uber, Lyft and AirBNB to invest heavily in criminal background screening.
(We won’t speculate too much on how the coronavirus pandemic and the associated economic crisis will reshape the employment market. We think we can safely assume, however, that gig-based work arrangements will continue after the country reopens for business. Employers will continue to need criminal background checks, perhaps even more so than before as many municipalities are releasing inmates from jails to curb spread of the virus in the prison population.)
On the other hand, criminal background checks are edging toward becoming commodities. As more law enforcement agencies and courts make their records available online, it’s easier than ever to conduct a criminal background check.
The Commoditization of Employment Background Screening
In terms of the data, and from the perspective of an employer, one background check is as good as another.
If you’re a CRA, the situation doesn’t leave you much choice than to compete on price, squeezing your margins thinner and thinner. For a while, this may have worked as automation improved efficiency. But by now, most CRAs have reached peak efficiency for their core services and cannot lower the cost of goods sold any further.
Is there anything you can do to grow as a CRA besides tussling over price with an increasing number of competitors for the same customers?
Growth Opportunities for CRAs
As we see it, to compete and grow, CRAs need to find new ways to demonstrate value and earn revenue. There will always be a demand for pre-employment background checks, but CRAs should look to tack on other business models and service offerings for growth in the market, and cash flow consistency.
One way to do this is to look at the role of the CRA in terms of the lifecycle of employment. That means expanding the vision of your business beyond the standard pre-employment background check.
Here are four underexploited opportunities to establish an expanded relationship with your clients in the background screening industry:
1. International Background Checks
The U.S. market for background screening may be saturated, but the United States is only one country. American CRAs may find opportunities to conduct background screening in foreign markets or for foreign employers in the U.S.
According to a national survey sponsored by HR.com, 96% of American employers conduct one or more types of employment background screening. However, only 4% of employers conduct international checks on all employees.
The Society for Human Resources Management reports that companies skip international background checks because:
- They believe global screening is only for multinational corporations (even though 17% of the U.S. workforce is foreign-born).
- They don’t know where or how to start.
- International background screening is too complex
- International screening takes too long.
By educating your customers on the need for global criminal checks and making the process simple and quick, you can offer your customers a valuable service few of your competitors provide.
2. Administrative Functions
In addition to running background checks, a growing number of CRAs offer to perform administrative services on their behalf, such as applying their adjudication criteria, sending adverse action notifications and, or individualized assessment documentation.. There may be other opportunities for CRAs to step into the administrative process around background checks, as well.
3. Self Screening
More and more job seekers are trying to stay one step ahead of potential employers by checking their own backgrounds to head off any issues, correct discrepancies, or just to know what employers are learning about them.
Job sites such as ZipRecruiter recommend that job seekers “own” their records: “Alerting the hiring manager to any incidents that appear on your background report gives you the power to tell your story in person, rather than letting the documents speak for you.”
As a growing number of job seekers take this advice to heart, you can find opportunities to expand your business beyond employers to employees — especially if you make ordering a background check on yourself straightforward and affordable.
4. Continuous Criminal Monitoring
We believe Continuous Criminal Monitoring is the most promising source of revenue growth for CRAs in the coming decade.
The vast majority of employers conduct background screening only during the hiring process or just before a new hire starts work. According to the Society for Human Resources Management, nearly 90% of employers never rescreen employees after the initial background check.
On the rare occasions when rescreening does occur, it is typically tied to job promotions or the addition of new responsibilities. Between these sporadic checks, employees may be arrested, convicted, and even incarcerated without their employers’ knowledge. (Statistics tell us that 12% of the workforce is likely to be arrested over the next five years.)
Continuous Criminal Monitoring is a post-hire service that provides real-time alerts on criminal activity in a workforce population — throughout the duration of employment.
Background screening industry experts like Nick Fishman estimate that Continuous Criminal Monitoring will generate over $1 billion per year for CRAs over the next few years.
Continuous Criminal Monitoring will “help background screening companies like you increase margins and profitability and create more value for your company through subscription pricing,” Fishman said.
How does Continuous Criminal Monitoring work, and how can you add it to your services as a CRA? Get all the details in our free guide for CRAs, “Close More, Churn Less, and Create Subscription Revenue Through Continuous Criminal Monitoring.”