Smile ID, the leading KYC and identity platform in Africa, has released its latest ‘The State of KYC in Africa H1 2023 report which reveals the continued problem of fraud in the crypto space.
According to the report, crypto makes up the highest fraud rates of any industry in Africa.
Africa’s cryptocurrency sector continues to grapple with high fraud rates
– The State of KYC in Africa H1 2023 Report by @usesmileid pic.twitter.com/hZprUOatwS
— BitKE (@BitcoinKE) July 31, 2023
As per Smile Identity’s H12023 assessment of KYC (Know Your Customer) in Africa, there was a 23% reported decrease in fraudulent KYC attempts during the first half of 2023. This decline is five percentage points lower than the drop observed during the same period in the previous year.
With Smile ID having recently hit the milestone of checking 75 million unique ID checks since 2018, the decline in identified fraudulent KYC attempts suggests a reduction in the overall number of such attempts across the continent.
Among the various IDs targeted by fraudsters, the three most commonly exploited were the national IDs of Kenya, Nigeria, and South Africa. The predominant tactic employed by fraudsters was using stolen or lost IDs for KYC purposes during the onboarding process.
The most common types of Identity fraud that take place on the continent are:
- Selfie spoofs, where scammers with stolen IDs attempt to pass themselves off as the owners of the documents by using a photo to impersonate someone else
- Face mismatches, where a valid ID number is provided, but facial biometrics do not match the ID
- Fraudulent IDs which could be counterfeit IDs, unacceptable ID types, tampered documents, expired IDs or times when an actual ID card was not provided
According to the report:
- Identity fraud rates in the BNPL industry have fallen to a record low of 4% from 37% in the previous time frame
- In contrast, Africa’s cryptocurrency sector continues to grapple with high fraud rates, while
- The payments and remittances industries are witnessing a marked increase in fraud from 2022
In the 2022 report, Smile ID found crypto to have experienced the lowest cases of fraud despite a 30% increase in KYC onboarding at the time.
On a positive note, the proportion of female ID verifications processed by their systems has seen significant growth over the past two years increasing from 10% in the third quarter of 2021 to 35% during the first half of 2023.
The company highlighted notable growth in female verification within three sectors:
- Buy Now Pay Later
- Banking and lending
- Remittances
The increased adoption of female verification was particularly significant in these areas.
Smile Identity’s report also highlights an overview of digital identity initiatives across Africa. It covered:
- Ethiopia’s enrollment for its Fayda national ID
- Kenya’s implementation of a unique personal identifier
- Uganda’s upcoming launch of a digital ID scheme scheduled for the last quarter of 2023
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