ID verification and KYC compliance startup Smile Identity raises $20 Million Series B round from lead investors like Costanoa Ventures, and Africa-focused venture capital firm Norrsken22.
KYC and identity verification are becoming increasingly important in the finance world where finance companies must meet KYC/AML standards set by regulators as they look to stop bad actors from accessing financial systems.
Africa has become a hotbed fintech and as such more tools and solutions for managing regulatory risk and keeping bad actors like fraudters, terrorist organizations and drug traders at bay are needed.
This is why the continent is seeing an uptick in startups in KYC and identity verification systems space.
Mark Straub and William Bares launched Smile Identity in 2018.
Smile Identity provides ID verification and KYC compliance for African faces and identities and the identity tech startup just received $20 million in Series B funding to further its expansion plans.
Smile identity had previously announced a $7 million Series A investment in July 2021.
This new deal brings the total funding amount into the startup to $30 million by investors.
The investors that participated in this Aeries B deal include ValueStream Ventures, Intercept Ventures, Latitude, Future Africa and 500 Fintech, Commerce Ventures, Courtside Ventures and Two Culture Capital.
Smile Identity said in a statement:
This funding round will accelerate the development and adoption of our AI-powered identity verification tech, ramp up hiring efforts in East, Southern and West Africa with a focus on product and engineering, and expand into new markets, particularly Francophone and Arab-speaking countries.
We will also partner closely with ID authorities and governments to create consumer consent standards and enforce local African data protection laws across the continent.
Smile Identity provides identity solutions that help its clients to mitigate fraud and onboard new customers efficiently.
In Smile Identity’s 2022 “State of KYC in Africa” report, it was noted that fraud rates in Africa reached an all-time high of 28% last year. The most common attacks cited by the report include fraudsters providing fake or stolen ID numbers or altered documents such as driver’s licenses, passports and national IDs. Or face mismatches, where facial biometrics do not match the valid IDs.
Smile identity checks fraud for its clients by using a host of solutions like identity verification, digital KYC, user onboarding, liveness checks, face verification, document verification and anti-fraud checks, with the most important service being identity data deduplication.
Most of the fraud that Smile Identity checkmates for its clients who are mostly finance companies happens at the account opening or onboarding stage.
Smile Identity’s CEO Straub had this to say about Smile Identity’s tech:
“If you onboard a customer and don’t check biometrics, you may be missing 50% of the fraud. The biometric deduplication engine [our smart selfie], which is trademarked as our face recognition technology, can be used both at onboarding and at the stage of deduplication and authentication,” said on the call.
6 months ago the Identity startup had access to more than 250 million identities, it could perform verification for 15 different ID types across 6 different markets on the continent while performing over 1 million identity checks monthly.
Now after launching its Document Verification product, it can cover a billion identities and verification processes globally according to its CEO.
The CEO also had this to say about its new launch:
“The interesting update we have is the Document verification, which analyzes a document’s photo and compares that to users’ provided selfie. And with that product, we can cover all of Africa. So you know, instead of covering 250 million people, we can cover over a billion people. We’re talking about over 230 ID types from more than 100 countries, including all of Africa, the diaspora, much of Europe and North America,” noted the chief executive.
CEO Straub also said:
Another area of growth was that Smile Identity processed over 30 million identity verifications in 2021; that’s over half the KYC checks the startup has recorded since inception: about 50 million. The KYC verification upstart, which has since doubled its client base since 2021 and now serves over 100 businesses in banking, fintech, education, agriculture and e-commerce, also claims to perform between 2 to 2.5 million monthly identity checks.
Smile Identity grew its clientele across all these products by more than 100% over the last year and tripled its revenues within the same time frame.
Smile Identity Business Verification (KYB) solution which allows 30 detailed business lookups such as registration number, incorporation, directors, beneficiaries and proprietor status is currently available in Nigeria, Kenya and South Africa.
It is also present in more than 10 countries with offices in London and Cape Town.
Straub also said:
The firm is a market leader because of “an incredibly diverse team and best-in-class technology.”
We bring those two things together and focus on delivering the best outcomes for our clients,” he added. “The outcomes are measured by coverage of all the different types of identities and countries, pass rates, user journey optimization, appropriate compliance,” he added. “Many African countries are now passing their data protection regulations. It’s challenging to keep up with all that if you’re operating in five or six markets, especially if you’re running digital financial products. We try to simplify all that, put it into software, and make it available for your developers so that you can integrate our software and start onboarding customers while protecting yourself against fraud and staying compliant from day one.”
If you onboard a customer and don’t check biometrics, you may be missing 50% of the fraud. The biometric deduplication engine [our smart selfie], which is trademarked as our face recognition technology, can be used both at onboarding and at the stage of deduplication and authentication,” Straub said on the call.
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