Last month, several African fintech companies such as Flutterwave as well as Soyuz54 make headers for compliance and fraud checks. Both unrelated events further highlight the importance of Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, and why regulators have strict policies that financial institutions must be held accountable for when operating on the continent and around the world.
For many startups whose services help control the operations of financial institutions such as banks and fintech companies, this period underscores their relevance more than ever. In the latest development, you confirm, a Lagos and San Francisco-based identity verification company helping African banks and startups automate KYC and other compliance procedures, announces a $1 million seed round extension. The startup raised $1.5 million in 2020, bringing its total seed investment to $2.5 million.
Africa-focused venture capitalists Orange Digital Ventures (ODV) and LoftyInc Capital, the two investors who co-led the initial seed round, have also spearheaded the expansion. Additional investments came from Octerra Capital, Plug & Play Venture, Syntax Ventures, HTTP Investors, Afer Group and Fronesyz Capital.
The spread of financial services in Africa is starting to attract more attention from regulators. According to reports, $116 billion worth of transactions will be made through digital payment channels this year, requiring strict measures to prevent identity theft and fraud. Thus, increased focus on maintaining transparency in financial regulation and improving KYC and AML strategies through the introduction of regulatory technologies has become an important factor in the growth of the market. And as demand for regtech grows around the world, so will demand in Africa, with reports saying it will reach around $1.2 billion over the next five years.
Youverify entered the African tech arena when its founder and CEO Gbenga Odegbami founded the company in 2018. Launched in the Nigerian market, Youverify has provided address and identity verification APIs for the first time to several financial institutions. Now the company has added more KYC products and expanded into new markets such as Ghana, Ivory Coast, South Africa, Kenya and Uganda.
“Our clients see us as helping them automate their KYC and compliance issues,” Odegbami said by phone with TechCrunch.
In addition to identity verification beyond the Bank of Nigeria Verification Number (BVN) and address, Youverify includes KYC and compliance products such as transaction monitoring, Odegbami said. He also clarified that these proposals address issues that some fintech platforms have recently faced: alleged money laundering issues in the case of Flutterwave in Kenya and Ping Express in the US, and fraud in the case of Union54 chargebacks. In the latter case, Youverify claims it could have prevented large-scale chargeback scams by defining a transaction pattern to flag fraud by blocking virtual cards and linking them to fraudsters making multiple fake chargebacks.
“They are [Union54] grew faster than they could put in place proper transaction monitoring and fraud detection systems that would identify transactions originating from their customers,” the CEO said of the chargeback situation that Union54 has been dealing with over the past couple of months. “A system like ours will be able to identify previous and new patterns in a way that we can help such a company.”
Just last year, Youverify started working with fintech companies. Initially, most of his clients were government agencies, large corporations like Bolt, and banks. Nearly two-thirds of Nigeria’s commercial banks, such as Standard Chartered, Standard Bank and Fidelity Bank, use identity verification platform and KYC products, according to Youverify.
However, in an effort to serve more customers, the company launched its own technology, Youverify OS (YVOS), which is a single platform for automating due diligence and combines risk and compliance management with a core identity verification platform to provide these fintechs with an enterprise-grade compliance solution. requirements. With its other product, vFORM, a low-code, no-code tool, businesses can create a custom process to connect new customers using a drag and drop builder.
As a result of diversifying its clientele and the demand for its KYC products, Youverify’s client base has grown by 300% and now serves more than 400 banks and fast-growing startups, Odegbami said. In the past 24 months, Youverify’s application processes have grown over 1,000% to over 5 million applications that have helped clients recruit talent, sell financial products, and remotely hire drivers to board. The company’s YouID digital identity platform has added more than 500,000 users, with 600 service providers on the waiting list in the market across the continent. Odegbami said the Lagos company’s ARR exceeded $1 million last year.
Youverify is not the only identity verification company in Africa. Similar providers include Smile Identity and YC-backed companies IdentityPass and Dojah. Without further ado, Odegbami called his company a “market leader” because it entered the market much earlier, has more experience, and provides more datasets than others.
Over the next 18 months, Youverify plans to expand its presence to 30 countries, especially in southern, eastern and French-speaking Africa, where Odegbami said the company will be actively recruiting. It also intends to increase the number of identifiers it can validate from 400 million to 2 billion and develop new automated products for gaming, travel, healthcare and telecommunications compliance.
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