Picture this: you want to open a bank account.
You’re required to fill some forms and wait in line as soon as you enter the banking hall. It is a long wait, but if you persevere, you get to the front of the queue, where the teller collects your forms and asks for a government-issued ID.
The teller glances at the picture, then at you, then back to the picture again. Then, satisfied by the resemblance, she takes your ID into a back room to make a photocopy. As she hands it over to you on her return, you ask when you will be able to use the account.
“You will get an email when it is ready,” she says. So, you go back home and wait. You wait until you almost forget you needed to open a bank account—then the email arrives. “Congratulations! Your new bank account is opened!”
Hold on. You still have to return to the bank’s branch to ‘activate’ your account. At this point, you are not sure it is worth another two-hour queue. You would not be alone in thinking that. In the UK, a quarter of financial service applications are abandoned due to difficulties in the Know-Your-Customer (KYC) process. This figure triples in the e-commerce sector, with most users dropping off during login or payment verification.
The Problem: Inefficient identity verification services
Most people find these verification processes to be clunky and inefficient. You could be left waiting for anywhere between 24 hours and six weeks for verification, depending on the types of checks needed. A big reason for this delay is that the bank teller has to input your details into the bank systems or background checking software before they can approve your new account for the final step in our illustration.
Between January and May 2020, Nigerians opened 35 million bank accounts, equivalent to 233,000 account openings per day.
Now picture being a bank employee in Nigeria whose primary responsibility is KYC and customer due diligence. Hundreds—if not thousands—of accounting opening forms hit your desk each day. You must go through folder after folder after folder of forms, manually inputting details into your computer. Every few dozen entries, you type in the wrong Passport ID number. Some you catch, others you miss, and they eventually return with ‘ID number not a match’.
Not only is this inefficient, but it is also an inefficient use of your time. The company misses out on diverting resources to higher-value activities and leaving the repetitive work to a programme.
The need for quick, efficient, and secure identity verification services goes beyond financial institutions. It has wide-ranging business use cases.
Smile Identity is poised to capture this opportunity.
The Future: Smile Identity
Smile Identity believes everyone should be able to prove their identity quickly, easily, and remotely – they provide a KYC tool that shifts the verification burden away from employees, ensuring accurate information within quicker timeframes.
Whereas human verification can take hours, days, or even weeks, Smile Identity uses computer vision combined with API connections to relevant identification Authorities to give results in seconds, outperforming even comparable United States verification services that promise results in minutes.
For a Smile Identity Customer (“Partner”), the new identity verification journey will look like this: To open a bank account, you download the banking app. Then, prompted to enter details of your government-issued ID, you input your passport information. The app then prompts you to take a selfie. Once the selfie is accepted, the software cross-checks the passport number with that on file at the ID issuing authority and confirms that both photos match.
Back at the bank, the employee has access to a dashboard, complete with the selfie, the results and a confidence level (the software calculates how likely it is that their result is correct). Human reviewers are only needed by exception when a “spoof” (fake selfie) is suspected.
This process is quick, efficient, and secure.
After activating your account, Smile Identity enables the bank to use your selfie as a second-factor authentication ( instead of, in addition to, an OTP). In addition, the Bank can request that you provide a selfie as a remote form of biometric second-factor authentication, regardless of what kind of smartphone you’re using. As a result, it is easy for you and the bank to re-confirm that the person attempting to use the account is the same person who registered initially and completed KYC.
Using technology in this way has a few key benefits.
First, it removes the burden of employees having to manually verify hundreds of customers in a day, putting customers in charge of their identity validation. Therefore, employees spend less time conducting identity and background checks. With this, businesses can reallocate staff to higher-value in-branch activities to drive cost-efficiency.
Second, this approach will drive increased access to services. As explained earlier, customers are often discouraged by the effort and cost required to provide their identity. Removing identity verification barriers can facilitate access to essential services.
Although these identity verification solutions can be used in many ways, Smile Identity Partners currently span three main groups.
First, Fintechs, many of whom compete on speed or transaction ease and do not have the resources to physically verify consumer identities.
Second, regional or community banks, which have the scale and large distribution. They will be looking to reduce overheads on verification and streamline workflow processes on the volume of transactions they have.
Third, large banks and telcos. These firms reach millions of customers and need to reliably verify them all. As transactions get more complicated or as KYC/AML requirements change, they often have to choose between shutting off customers or paying massive fines.
Smile Identity boasts ~50 active customers, including Guaranty Trust Bank, Stanbic, ChipperCash, Pagatech, KudaBank, Luno and more, with another 25 or so in the pipeline. Also, their ID Validation covers over 250 million identities across Africa, connects to over 15 different ID authorities across 5 of Africa’s largest economies, and counting.
Mark Straub is the CEO of Smile Identity. He has been a venture capital investor for over a
decade and has worked with businesses doing adtech, fintech, healthcare, and energy. He is a former Associate of DFJ. In addition, he was the Co-Founder of Khosla Impact, a venture fund that invested across India and Africa and provided investment to Flutterwave. As a result, he has 15 years of relationships across Emerging Markets.
Bill Bares is the CTO of Smile Identity. He has 25 years of cross-domain experience, with previous experience including the design of video processors for Sierra Semiconductor (production of computer hardware). In addition, Bill is a former Executive of a cloud authentication company Verayo, which Khosla Ventures-backed.
We are excited to be a part of Smile Identity’s journey as it transforms the future of Identity Verification. Our investment in Smile is a follow-on investment in its recently announced series-A round. Future Africa will continue to support Smile Identity as it scales across Africa.
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