Africa: Rising Adoption of eKYC Solutions Marks Digital Transformation in Africa

In the first half of 2023, businesses in Africa have enthusiastically embraced digital transformation, sparking a surge in demand for innovative e-KYC (Know Your Customer) verification solutions. Smile ID, a provider of identity verification solutions, has reported a significant uptick in activity in its recent report, “State of KYC in Africa H1 2023.”

The report sheds light on fraud attempts observed during the first half of the year, offering insights into the evolving KYC landscape in Africa, and delving into the state of identity verification across various countries while also uncovering emerging fraud trends.

Smile ID has reported an overwhelming demand for seamless digital identity verification solutions in 2023. By July 2023, the company had conducted over 75 million KYC checks since its inception, with an impressive increase of more than 50% during the first half of the year. This upsurge clearly signals the growing adoption of digital identity verification across the region.

Based on data from these KYC checks, Smile ID notes a decline in fraudulent onboarding attempts across Africa in H1 2023 compared to the same period the previous year, dropping by 5 percentage points to 23% from its 2022 peak of 28%.

In addition to the decrease in fraud, the report highlights that innovative identity verification solutions are enabling businesses to deliver enhanced customer experiences and expedited user onboarding processes.

Smile ID claims to have reduced the average verification time using popular identification documents (IDs) to a mere 1.93 seconds in major markets such as Nigeria, Ghana, Kenya, and South Africa.

Additional Key Findings:

1. Biometric Fraud Trends: Biometric fraud attempts primarily targeted national IDs of Kenya, Nigeria, and South Africa during the first half of 2023.
2. Industry-Specific Fraud Rates: Fraud rates in the “buy now, pay later” (BNPL) sector dropped significantly, from 37% in H1 2022 to just 4% in H1 2023. Conversely, Africa’s cryptocurrency sector continued to grapple with high fraud rates, constituting 15% of all biometric fraud attempts in H1 2023. The payments and remittances industries recorded an increase in fraud, reaching 13% in H1 2023.
3. National Trends: While Kenya saw an increase in fraud attempts, rising from 10% in January 2023 to 17% in June 2023, South Africa witnessed a notable drop in ID fraud, decreasing from 17% to 8% during the same period.

The surge in the use of digital identity verification solutions in Africa aligns with the continent’s rapid move towards digital transformation. Governments are increasingly looking to modernize their identity systems, leveraging technology and digital platforms to streamline administrative processes, enhance personal data security, improve accuracy, and boost the efficiency of identity verification.

Ethiopia, for example, is implementing a nationwide biometric digital ID system, aiming to register its entire eligible adult population of 120 million by the end of 2025. Kenya is also rolling out its new digital ID system, with plans to begin the implementation in the near future. Somalia has recently launched its biometric identity card system as part of efforts to combat security threats and identity fraud.

These developments underscore the growing importance of digital identity and e-KYC solutions in Africa’s journey towards digital progress and financial inclusion.