Kenya and Nigeria named as the highest-risk African countries for fraud, according to Smile ID report

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

Kenya and Nigeria named as the highest-risk African countries for fraud, according to Smile ID report
Image source: Smile ID State of KYC report, H1 2023

Smile ID (formerly Smile Identity), Africa's leading identity verification and onboarding service provider with 75 million KYC checks done since inception, has released its third report on the State of KYC and Digital ID trends in Africa.

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."

One key aspect of this year’s report was the fraud trends across critical African markets—Ghana, Kenya, Nigeria and South Africa. “As more businesses across Africa adopt biometrics for identity verification and fraud prevention, more fraud is being caught,” says Smile ID.

ID fraud attempts in Kenya are growing, likewise in Nigeria

Smile ID chart showing fraud attempts across four key African markets

Kenya is a significant tech hub in Africa; hence, worth discussing.

In the first half of 2023, the country’s startups—in 24 deals—raised about $350 million from Venture Capitalists. This makes it the most funded country, in terms of investment value, of the four markets—Ghana, Kenya, Nigeria and South Africa—in view. By contrast, Nigeria—Africa’s most populous nation—only surpassed Kenya regarding the number of deals done, 46, but trails in the worth of those deals, $160 million.

An increase in startup investment activity indicates a vibrant ecosystem. But the positivity is tainted by the corresponding increase in fraud attempts. According to Smile ID data, fraud attempts in Kenya jumped by 7% from about 10% in January to 17% in July 2023.

Similarly, fraud attempts increased to 13% in Nigeria from 8% in January 2023.

However, in Ghana and South Africa, fraud attempts have declined. Between January and June 2023, fraud rates in South Africa dropped from 17% to 8%, while Ghana went from 12% to 10% in that same period.

Smile ID says, “Fraud rates move up and down across countries as growth and user behaviour changes in response to new products, services or changes in regulations.”

Further research must be done to pinpoint the drivers of these fraudulent attempts increases. That said, such a trend calls for proactive measures from businesses in the region. By leveraging solutions that catch the common fraud attacks—Fake ID documents, Stolen ID documents, Selfie Spoofs, Duplication Fraud, and Synthetic Fraud, African businesses can fortify themselves and minimise losses from fraud.

“The biometric KYC solution at Smile ID involves matching a user's submitted selfie with the photo on their Government-issued ID documents. This approach combines the reliability of document verification with the added assurance of biometric comparison, ensuring that your users are indeed who they claim to be, and has proven to reduce fraudulent users by 50%”, says the report.

Learn more about the common fraud attacks and trends in Africa and how to mitigate against them in Smile ID’s latest report.

Smile ID State of KYC report H1 2023 cover
Learn more about the State of KYC in Africa by clicking on this image.

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