The State Of KYC In Africa: Insights From Smile ID’s Latest Report

With 75 million KYC checks done, Smile ID is out with its third report on the State of KYC, customer onboarding, and fraud trends in Africa.

By Staff

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The rise of digitalization in various sectors such as Payment, Crypto, BNPL, and Remittance among others has led to an increased need for electronic Know Your Customer (eKYC) or digital KYC processes. In Africa, the importance of identity verification and user registration has grown significantly with the shift of products and services to the online realm. One prominent identity verification service provider, Smile ID (formerly Smile Identity), has been leading the way in this area, conducting over 75 million KYC checks since its inception.

State of KYC in Africa-H1 2023 Report

Smile ID recently released its State of KYC in Africa-H1 2023 report, shedding light on several crucial aspects. One of the key highlights was the analysis of fraud trends in critical African markets, including Ghana, Kenya, Nigeria, Uganda, Rwanda, and South Africa. The report indicates that as businesses across Africa adopt biometrics for identity verification and fraud prevention, more instances of fraud are being detected.

The data from Smile ID reveals interesting fraud trends across the continent. In Kenya, fraud attempts increased by 7%, rising from 10% in January 2023 to 17% in July 2023. Similarly, Nigeria saw an increase in fraud attempts, rising to 13% from 8% in January 2023. However, Ghana and South Africa experienced declines in fraud attempts, with South Africa’s fraud rates dropping from 17% to 8% and Ghana’s decreasing from 12% to 10% during the same period.

Regulatory Changes Influencing KYC

The report also emphasizes the impact of regulatory changes on KYC in the region. For example, recent regulatory reforms have influenced digital KYC practices in Nigeria, following the Financial Action FATF’s mutual evaluation. The evaluation highlighted up to 15 strategic deficiencies in Nigeria’s Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) regime, resulting in Nigeria’s greylisting. This development is expected to drive reforms in digital KYC, particularly regarding customer due diligence reporting.

To combat the rising trend of fraudulent attempts, African businesses need to take proactive measures. Smile ID suggests leveraging solutions that can identify common fraud attacks, such as Fake ID documents, Stolen ID documents, Selfie Spoofs, Duplication Fraud, and Synthetic Fraud. One of the key solutions offered by Smile ID is a biometric KYC solution that matches a user’s submitted selfie with the photo on their Government-issued ID documents. This approach ensures reliability through document verification while adding an additional layer of biometric comparison, reducing fraudulent users by 50%.

The first report was published last year and introduced the State of KYC in the first half of 2022. The second report provided a full-year 2022 view into the state of KYC in Africa, the role and drawbacks of national IDs, and emerging fraud trends. This year’s report offers a deep dive into KYC regulations across 13 African countries and other industry insights reflecting the identity company’s expansion and growth story.

Speaking on why they publish these reports, the Director of Marketing at Smile ID, Peace Itimi, says, “Our biannual ‘State of KYC in Africa’ reports testify to our ongoing dedication to facilitating secure and efficient identity verification, supporting compliance and regulatory understanding, and driving the fight against fraud. By offering these insights, we aim to not only lead the conversation but also to shape the future of digital identification and KYC processes in Africa.”

The eKYC concept has become increasingly vital as African businesses shift towards digitalization. Smile ID’s State of KYC in Africa-H1 2023 report provides valuable insights into fraud trends and the impact of regulatory changes on KYC practices. By implementing proactive measures and leveraging advanced biometric solutions, businesses in Africa can fortify themselves against fraudulent activities and ensure regulatory compliance, customer satisfaction, and enhanced security.

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