Why is the Use of Background Screening Software Growing so Quickly?

Background Check

More companies are adopting background screening software every day, and the number is projected to grow further. We dig into the reasons why.

All around the world, companies are discovering the value of adopting a wide range of HR tech solutions. Employee background screening software is an area that’s growing particularly quickly. We’re pretty happy about that, obviously. But - as in any business - it pays to understand why your customers seek you out. So let’s take a closer look at the adoption of background screening software around the world, and the reasons why this particular kind of technology is growing so rapidly.

The market: current state and future projections

The global market for background screening software is estimated at just over $4.5 billion (USD). That’s a significant enough portion of the overall market for HR technology and software solutions. But the size of that market is projected to grow even further.

Recent projections have the global market at $7.26 billion by 2030, with a compound annual growth rate (CAGR) of 8.2% in the interim. The North American market is by far the largest in the world right now, comprising over 50% of the business globally. Europe is a fairly distant second, just shy of 25%. While those mature markets are still expected to grow further, predictions for the worldwide market show most potential for growth in the Asia Pacific region, with a projected CAGR of 11.4% over the coming years.

It’s not entirely common for an already-sizable market to show so much potential for future expansion. There are several reasons why  the future looks so bright for background screening software.

Why is the market projected to grow so rapidly? 

There are seven primary reasons why the demand for employee background screening software is strong and will continue to grow.

1. Business Demographics

There are a number of changes in the business landscape all around the world; changes that are inherently creating more demand for background check software. One change - particularly outside more mature markets like North America - is the steady increase in business activity in smaller economies. This factor is one reason why the growth in Asia Pacific is likely to be so strong.

In mature and emerging markets alike, an increase in M&A activity is also creating a greater need for these checks, as acquiring companies invest in background screening for their potential employees.

In addition to the changes on the demand side, there are also shifts in the way the software is supplied that are creating opportunities in the marketplace. Most notably, online reference checking software, accessed via cloud-based platforms, is lowering the overall cost of use for businesses. This, in turn, is making employee background screening software more accessible to small and medium sized companies with more restricted budgets. This is a particularly welcome development, as SMEs assume just as much - if not more - risk in making a bad hire.

2. Regulatory Climate

As business changes in the ways described above, the legal and regulatory environment in which businesses operate is also changing. There is more accountability on the part of companies to perform greater levels of due diligence than in the past. And more potential liability for those who do not. 

Consider the use of social media, for example. Employees’ use of social media presents a greater level of ability to verify background details. Companies are more easily able to ascertain that the employee is who they say they are, and that there are no red flags that should prevent a hire. The greater ease in performing these checks is a double-edged sword; it also creates a greater responsibility for companies to follow through and perform them. Employee background check software not only automates large parts of this process, it also makes organised record keeping easier for the more stringent documentation requirements we see today.

3. Increased Risk

For companies of all sizes, the level of risk stemming from making a bad hire is increasing. The reason? Data security, and the implications of a breach. The data itself carries greater inherent risk. A company’s systems house not only the business’s internal data - much of which is often sensitive and confidential - but customer data, too. The financial and PR risks of a breach are huge.

Moreover, positions of all kinds, and at all levels, have greater access to this data. The potential for this data to be mismanaged - either maliciously, or negligence - is a serious matter. It’s not just the employees whose jobs involve direct access and control. With a rise in remote work and the accompanying widespread network access by corporate and personal devices alike, companies must take extraordinary precautions to ensure that they hire people who can be trusted. Background screening software is one important way in which they can do this.

4. Fraud Mitigation

Technology is making it easier for companies to automate employee background checks. Sadly, technology is also making it easier for fraudsters to try to circumvent a robust hiring process by providing fake references.

The practice is alarmingly common. One UK study, conducted by the Federation for Small Business and the BBC, hinted at the extent of the problem. 17% of companies reported that candidates - most at the mid-level - had submitted fake references. Of those companies, 76% had this happen on multiple occasions. The reality is that this is likely only the tip of the iceberg, since these are only the companies who discovered the fraud. There are certainly many more businesses who never realised that the references they were given weren’t legitimate.

Employee background check software is designed with fraud protection in mind. Using various techniques - IP address tracking, advanced linguistic analysis, and more - the software identifies signals that a reference may not be valid. In doing so, it alerts companies to a potential bad hire.

5. Efficiency

Every single business must constantly find ways to do more with less. (Yes, we know we’re preaching to the choir.) That means looking for opportunities to streamline processes, and to automate repetitive and administrative functions.The opportunity for increased efficiency makes employee background screening software a particularly smart investment.

Reference checks are an incredibly time-consuming process when they’re conducted manually, by staff. It takes time (and often aggravation) to get in touch with referees, time to conduct the references themselves, and time to aggregate reports. Online reference checking software eliminates or automates every stage of this process. Put simply, this saves your staff countless hours of work, and frees them up for higher-value work.

6. Information Integrity 

The great thing about human beings is that we’re remarkably astute at interpreting things we hear and aggregating that information to draw conclusions. This can also be a drawback in being human, at least when it comes to reference checks.

Checking references through a person-to-person conversation carries a high degree of risk of misinterpretation. In the words we hear, we have a tendency to apply filters. If we have a positive impression, and we hear things that conflict with that perspective, it is all too easy to disregard or minimise those pieces of information. The opposite - pushing aside positive information that conflicts with a negative perception - can be just as true.

Background screening software allows for a higher degree of information integrity, capturing the precise language of the reference, in their own words. This is one important step in removing bias from the hiring process, without compromising a robust, documented process. Given the dynamics outlined earlier - particularly the heightened concern with respect to regulatory issues and liability - this kind of integrity is critical.

7. Candidate Experience

Last, but certainly not least, employee background screening software offers a better candidate experience. This is a critical differentiator for companies of all types and sizes in the race to recruit and hire top talent. Streamlining the hiring process, making it as seamless and efficient as possible (while not compromising the quality of the hiring decision, of course) is a significant contributor to a positive candidate experience.

Background screening software allows candidates and referees to quickly and easily complete their part in the process, on a platform that is branded to their prospective employer. It creates a candidate experience that keeps them engaged and moving forward towards their first day of work with their new company, and more companies are using this as a strategic hiring advantage.

Seven reasons: which ones are yours?

The market for employee background screening software is a multi-billion dollar industry, and will grow even more in the coming years. The seven reasons noted above are the main drivers for the adoption of this kind of software. Some may apply to you and your company, and you may even have additional reasons to consider this specific type of HR tech. Ready to join the crowd? If you’d like to learn more about putting these advantages to work for you and your business, get in touch today.