Africa’s leading identify verification and onboarding service provider, Smile ID, has released its third report on the State of KYC and Digital ID trends in Africa with 75 million KYC checks done.
The first report, published last year, introduced the state of KYC in Africa during the first half of 2022. The second report provided a full-year view of KYC in Africa in 2022, along with the advantages and disadvantages of national IDs and emerging fraud trends. This year’s report provides an in-depth look at KYC regulations across 13 African countries and offers other industry insights reflecting the identity company’s expansion and growth.
Speaking about why the company publishes these reports, the Director of Marketing at Smile ID, Peace Itimi, stated, “Our bi-annual ‘State of KYC in Africa’ reports reflect our ongoing commitment to facilitating secure and efficient identity verification, supporting compliance and regulatory understanding, and combating fraud. Through these insights, we hope to not only lead the discussion, but also to shape the future of digital identification and KYC processes in Africa.
A key finding of this year’s report was the fraud trends in some of Africa’s major markets—Ghana, Kenya, Nigeria, and South Africa. “The more businesses in Africa adopt biometrics for identity verification and fraud prevention, the more fraud is detected,” says Smile ID.
In the first half of this year, startups in Ghana—in 24 deals—raised about $350 million from venture capitalists. This makes Ghana the most funded of the four markets—Ghana, Kenya, Nigeria, and South Africa—in terms of investment value. By comparison, Nigeria—Africa’s most populous country—outperformed Kenya in the number of deals completed, 46, but was surpassed by Kenya in the total worth of those deals, $160 million.
An increase in startup investment activity can indicate a thriving ecosystem, but this positive trend is dampened by the corresponding increase in fraud attempts. According to Smile ID’s data, fraud attempts in Kenya increased by 7%—from about 10% in January to 17% in July—and fraud attempts in Nigeria increased to 13% from 8% in January.
However, fraud attempts in Ghana and South Africa have declined in recent months. Between January and June 2023, fraud rates in South Africa dropped from 17% to 8%, while in Ghana they decreased from 12% to 10%.
According to Smile ID “Fraud rates fluctuate from country to country, depending on a variety of factors such as economic conditions, user behaviour, and changes in regulations.”
More research is needed to understand the specific reasons for the recent increase in fraud attempts. However, businesses in Africa need to take proactive measures to protect themselves, such as using solutions that detect common fraud attacks—such as fake ID documents, stolen ID documents, spoofed selfies, and duplicate identities.
“The biometric KYC solution at Smile ID involves comparing a user’s submitted selfie with the photo on their Government-issued ID document. This approach combines the accuracy of document verification with the extra security of biometric comparison, ensuring that the user is who they claim to be. This approach has been shown to reduce fraud by 50%”, according to the report.
