BD Insider 218: Opay wants to block non-KYC-compliant accounts

Inside: Opay will block non-KYC-compliant accounts in March + Cova's post-mortem + the African startups in YC W24.

BD Insider 218: Opay wants to block non-KYC-compliant accounts

So far, two African startups, Cleva and Miden (by Tyrus Technologies), have been admitted into the Y Combinator (YC) Winter 2024 batch, according to the accelerator's directory. Both startups are Nigeria-based fintechs.

Cleva offers cross-border payment services and recently raised a $1.5 million pre-seed, while Miden provides businesses with APIs to issue virtual MasterCard and Visa payment cards.

Since YC announces participants in batches, it remains uncertain if these are the only African startups in the current batch.

Expect more updates about the cohort later this week.

In this letter, we explore:

  • the most attacked ID document in Africa
  • Opay's new KYC strategy
  • why Nigerian wealthtech startup Cova shut down

We also covered other noteworthy information including the latest African tech startup deals, opportunities, interesting reads, and more.

The Big Three!

#1. National IDs are the most attacked ID document type in Africa

The news: According to a report by Smile ID, a leading digital KYC provider in Africa, National IDs are linked to 80% of identity fraud attacks, making it Africa's most targeted document type.

"With more national ID documents in circulation than ever before, the chances of them getting lost or stolen get increasingly higher by the year, exposing holders to potential document fraud," the report reveals.

The Tanzanian ID is the most vulnerable with a 32% attempted fraud rate.

Source: Smile ID

Why it matters: In Africa, many businesses use government IDs like driver's licenses, passports, voter's cards, and national identity numbers (NIN) for customer verification. But fraudsters find ways to bypass these checks, often by using fake or stolen IDs, especially when accessing financial services.

An analysis of Smile ID's quarterly biometric and document fraud data revealed a consistent increase in the overall rate of fraudulent attempts in biometric and document verification over the past six quarters. This trend reached its highest point at 17% in Q4 2023.

Smile ID states, "There are two common ways businesses can fight document fraud. Businesses can either verify the ID's validity against ID authority databases or through document verification by comparing the ID document with authentic templates and security features to find inconsistencies."

The digital provider reports that 37% of document fraud was identified through the biometric feature in its verification solution. "Without biometric checks, we estimate more than a third of ID document fraud goes unnoticed," Smile ID said in its 2024 report on Digital Identity Fraud in Africa.

#2. Opay wants to block non-KYC-compliant accounts

The news: Opay, a Nigerian fintech startup, has announced that it will block accounts of users who have not completed their Know Your Customer (KYC) onboarding. The new policy, which will take effect in March 2024, aims to curb fraudulent and spam accounts; including impersonators.

According to Ikponmwosa Odiase, Opay's director of partnerships, "The fraudsters are not sleeping and we also are waking up to the challenge. It’s an industry challenge, unfortunately. So many fictitious accounts will go."

With its new KYC policy, when Opay users log into their app with a tier one account and lack their NIN, the app will prompt them to input it, without which they cannot proceed. This is one of the implemented measures. Additionally, for new customers, starting with the NIN will be mandatory, as Opay intends to pull information from the NIN into the wallet. This will go live next month [February].

Why it matters: Last year, the media scrutinised Opay for its lax registration processes, raising fraud concerns. Nigerian banks such as Fidelity and Standard Chartered also imposed transaction restrictions on a few neobanks including Opay, and PalmPay, citing the same issue.

Out of the ₦2.59 billion (~$2.8 million) that was involved in fraudulent activities in the first quarter of 2023, Nigerian banks lost ₦472 million (~ $523.7K) to POS and mobile fraud, according to the Nigeria Deposit Insurance Corporation (NDIC). 

In December, the Central Bank of Nigeria (CBN) mandated Nigerian financial institutions to implement stricter measures, requiring customers to provide their Bank Verification Number or a national identification number (NIN) for account or wallet opening.

Opay is likely planning to meet the April 2024 deadline set by the CBN.

Combating fraud in Africa

Download Smile ID’s 2024 Digital Identity Fraud in Africa Report, which uncovers document, biometric, and transaction fraud methodologies, its impact across Africa, and an in-depth guide on how businesses can build a robust anti-fraud system

Identity fraud is a growing problem across Africa, costing businesses millions yearly. Stay ahead of fraud in 2024

Read Smile ID's 2024 report

This is partner content.

#3. Post mortem: Why did Cova shut down?

Start here: Last week, we reported that Cova, a Nigerian wealthtech startup, is closing down due to "several factors," as indicated by its co-founders, Olu'yomi Ojo (CEO) and Yomi Osamiluyi (CTO), in an email sent to users.

According to the email, Cova will halt its operations on Feb. 10, 2024, with subscription refunds scheduled to be processed on or before Feb. 13.

What happened? The news of Cova's shutdown was initially disclosed in Vantage, a business memoir released in December 2023 by Olumide Soyombo, a prominent angel investor in Nigeria who has supported Cova.

According to Soyombo, although Cova was offering a relevant solution, two years into its existence, the co-founders observed that the product "was not gaining any traction." Ojo, in an undated email to investors, as documented in the memoir (Ref: Pages 248 & 249), stated, "We have carefully evaluated our financial situation and concluded that, although we have about a year of runway left in the bank, it is better to act in the interest of Cova investors and stakeholders than to burn through the cash. It would be unfair to continue spending the funds without a clear path to profitability or decent revenue."

A screenshot of Ojo's letter to Cova's investors.

Amid the market downturn, the tech ecosystem and other sectors have been discussing the path to profitability. In the last two years, startups like Jumia have actively restructured their operations to drive profitability, including cutting jobs and shutting down products.

Basil Moftah, General Partner at Nclude told that while businesses often require capital injections for growth, there is an increasing need for them to articulate a clear path to profitability. "Investors are likely to enforce more stringent criteria to ensure this trajectory. This reflects a growing emphasis on sustainable financial models," he said.

Know more: Ojo and Osamiluyi co-founded Cova in December 2021 to serve as a "single source of truth" for every asset that its users own. Cova raised at least $800,000 from investors, including Soyombo. "[Cova] gives you the power to aggregate, manage and track everything, even while you’re alive, and also helps your people discover and claim your assets when you’re gone," the CEO said.

In 2022, Cova co-founder Ojo stated that its user base was in the "thousands" globally, but only those in Nigeria, the UK and the US could sync bank accounts. Cova offered subscriptions from $10 to $100 per month or year respectively.

💰 State of Funding in Africa

North African startups dominated VC funding last week. Here's a summary:

  • DXwand, a MENA-based AI startup closed a Series A funding round of $4 million, led by Shorooq Partners, Algebra Ventures, and existing investor Dubai Future District Fund.
  • Kenyan agritech Shamba Pride secured $3.7 million debt-equity pre-Series A funding from EDFI AgriFI and Seedstars Africa Ventures.
  • Morocco-based copyright-management platform, Crealo raised $1.42 million in Seed funding from the 212Founders programme.
  • Mira, a beauty and wellness startup based in Cairo, received a $200,000 investment from Wingoo Investment and Technology.
  • Egypt-based edtech Edura closed an undisclosed pre-Seed funding round led by Smart Zone Startups Studio and angel investors.

📚 Noteworthy

Here are other important stories in the media:

  • Pade disbursed ₦11.473 billion (~ $12.7M) in salaries for its clients in 2023: Last year, Pade paid out an average salary of ₦240,000 (~ $266) to over 6,500 employees of its clientele. With 60% of employees earning less than ₦150,000 (~ $166) and 25% earning more than ₦250,000 (~ $277).
  • Chinese EV makers vie for the front seat in Africa's electric mobility drive: In a bid to further rival the West's grip on the global electric auto market, China is aggressively exporting its competing EV brands, even to Africa, Andrew Christian writes.
  • Top 10 most powerful African passports: 2024's definitive list of the most powerful African passports is here! Seychelles, Mauritius, South Africa, Botswana, Namibia, Lesotho, Eswatini, Kenya, and Tanzania made it to the list.
  • ID-related fraud issues faced by US fintech mirror Africa's trends: In 2021, 42% of US Bank Secrecy Act filings focused on identity fraud. Similar challenges exist in Africa, posing a dual obstacle for cross-border payments startups.

💼 Opportunities


We carefully curate open opportunities in Product & Design, Data & Engineering, and Admin & Growth every week.

Product & Design

Data & Engineering

Admin & Growth

Other Opportunities

  • Think securing funding guarantees your startup's success? Think again! Register for this free webinar by BrandOn on "Why Startups Fail Even After Raising Capital." Learn from Gerald Black (Black Ops), Oluwadunni Fanibe (TechStars) and others.

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