Science & Technology

E-KYC Surges in Africa

Innovative e-KYC verification solutions are growing in Africa, just as businesses across the continent are increasingly moving online.

E-KYC Surges in Africa

Smile ID, the identity verification solutions provider, has published a new report State of KYC in Africa H1 2023. The company shared its insights on fraud attempts during the first half of the year, and the evolving know-your-customer (KYC) landscape in Africa.

According to the latest findings, the skyrocketing demand for seamless digital identity verification solutions observed by Smile ID indicates rising technology adoption in the region. In July 2023, the company recorded over 75 million KYC checks since its inception. The checks showed an increase of more than 50% during H1 2023.

Growth of e-KYC solutions

The rapidly growing usage of digital ID verification solutions in Africa is linked to the fact that more and more local businesses embrace e-commerce. Inspired by swift digital transformation, local governments are also racing to update their identity systems with new digital technologies. Digitization of ID verification helps to streamline administrative processes, access better personal data security, improve accuracy and increase the efficiency of the process.

Thus, in Ethiopia, the government is implementing a nationwide biometric digital ID system. It aims to register all eligible adult citizens by the end of 2025. In Kenya, the government is also planning to roll out its new digital ID system this month, as the country’s digital identity plan has been approved earlier. In addition, Somalia has recently launched its biometric identity card system to combat security threats, terrorism and identity fraud. The local government plans to register 15 million Somalis for the national digital ID scheme by the end of 2026.

ID-related fraud statistics

As for the registered fraud attempts, the number of onboarding performed by malefactors fell across Africa in H1 2023, decreasing by 5 points to 23% from a peak of 28% in 2022. Moreover, fraud rates in the buy now, pay later (BNPL) e-commerce segment fell to a record low this year, decreasing from 37% in H1 2022 to 4% in H1 2023.

Reduced fraud is only one benefit of the innovative identity verification solutions, also enabling businesses to deliver improved customer experiences and onboard more users in a faster manner. In major African markets such as Nigeria, Ghana, Kenya, and South Africa, Smile ID claims it has reduced the average verification time to 1.93 seconds.

However, some sectors of Africa’s payment and e-commerce landscape continued to grapple with high fraud rates. For instance, local crypto market made up 15% of all biometric fraud attempts in H1 2023. Besides, the payments and remittances industries recorded a marked increase in fraud from last year, reaching 13% in H1 2023.

Biometric fraud attempts observed during H1 2023 mainly targeted national IDs of Kenya, Nigeria and South Africa. In Kenya, fraud attempts grew from 10% in January 2023 to 17% in June 2023, making it the highest-risk country for ID fraud among those analyzed.

At the same time, South Africa, that finished 2022 with the highest risk for ID fraud in the region, witnessed a significant drop in ID fraud attempts. Between January 2023 and June 2023, fraud rates in South Africa dropped from 17% to 8%.

Nina Bobro

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Nina is passionate about financial technologies and environmental issues, reporting on the industry news and the most exciting projects that build their offerings around the intersection of fintech and sustainability.