Biometric Verification Emerging as Powerful Tool in Combating Fraud in Africa

Smile ID (previously known as Smile Identity), the leading provider of identity verification and digital Know Your Customer (KYC) services in Africa, has unveiled its much-anticipated KYC Report for the first half of 2023. Drawing insights from over 75 million KYC checks spanning various industries, this comprehensive report offers valuable perspectives on the current state of identity verification practices across African countries.

The primary aim of this report is to shed light on emerging fraud trends and demonstrate how businesses can leverage identity verification to safeguard their operations. By doing so, it aims to drive Africa’s rapidly growing digital economy towards greater financial inclusion and secure digital transactions. For a similar post, read our comprehensive article on the Top Fintech companies in Nigeria.

Africa’s digital economy is rapidly evolving, encompassing 54 countries and a population of 1.4 billion people. However, the World Bank estimated that as of 2020, nearly 500 million Africans lacked proper legal identity documentation. This highlights the immense potential for identity verification solutions to bridge this gap and underscores the crucial role of identity infrastructure in Africa’s digital economy.

Smile ID’s KYC Report assumes critical importance as it equips businesses, especially in the fintech and banking sectors, with tools to mitigate fraud risks and instil trust in digital transactions.

The half-year 2023 KYC Report reveals that Biometric verification is emerging as a powerful tool in combating fraud, reducing fraudulent users by an impressive 50%. Notably, face mismatches accounted for 43% of ID fraud cases in 2023, suggesting the use of stolen or lost IDs, while 41% of frauds were linked to selfie spoofs. Biometric checks, particularly facial recognition, have proven crucial in identifying fraudsters, surpassing textual verification in effectiveness. This makes facial recognition the preferred and most accessible option worldwide, providing enhanced security for KYC processes.

Although local ID databases serve as a reliable source for real-time verification, the report highlights the challenge of frequent downtime, averaging 3%. However, leveraging Document Verification during ID database downtime offers a dependable solution, enabling seamless onboarding processes and facilitating business expansion into multiple markets through a single integration.

The report also indicates a growing adoption of digital identity across Africa, with significant progress in several countries. Ethiopia’s enrollment for the foundational Fayda ID, Kenya’s upcoming Unique Personal Identifier to replace Huduma Namba, and Uganda’s plans to launch a new digital ID scheme in Q4 2023 showcase a promising commitment to leveraging digital identities for enhanced services.

While onboarding fraud rates have declined by 5% in focus markets like South Africa and Ghana, the report highlights incentive-based acquisition as a factor associated with increased fraud attempts. Kenya, for instance, experienced a 7% surge in fraud over the last six months, with the National ID being the primary target. Additionally, the report calls attention to 11 African countries now on the FATF’s grey list, including South Africa, Cameroon, and Nigeria. This emphasizes the need for businesses to align their KYC/AML procedures with international best practices to ensure accountability and trust in Africa’s digital landscape.

Africa boasts one of the highest numbers of social media users globally, with over 54 countries and 1.4 billion inhabitants actively engaging with platforms like Facebook, YouTube, and Twitter. While social media has numerous benefits for connecting people and increasing exposure, it also necessitates a secure infrastructure with proper legal identity documentation and verification systems in place. Without these measures, social media can become a vulnerability to cyberstalking and theft.