Smile Identity, a prominent player in delivering ID verification and KYC compliance for African faces and identities, has acquired $20 million in Series B funding, among other roadmap initiatives, to continue its global objectives.
In July 2021, the startup announced a $7 million Series A financing. Costanoa Ventures, a Silicon Valley investor who co-led that deal, also co-led this new Series B round with Africa-focused venture capital firm Norrsken22. Lexi Novitske, general partner of Norrsken22, will join the Board of Directors.
Existing investors such as ValueStream Ventures, Intercept Ventures, Latitude, Future Africa, and 500 Fintech are among those taking part, as are new investors such as Commerce Ventures, Courtside Ventures, and Two Culture Capital. Since its inception in 2018 by Mark Straub and William Bares, the African KYC onboarding and identity verification platform has attracted more than $30 million in funding from investors.
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Smile Identity said in a statement that the funding will be used to accelerate the development and adoption of its AI-powered identity verification technology, increase hiring in East, Southern, and West Africa with a focus on product and engineering, and expand into new markets, particularly Francophone and Arab-speaking countries. The company expects that its war chest would enable it to work closely with ID authorities and governments across the continent to develop consumer consent standards and implement local African data protection regulations.
A Look At What Smile Identity Does
Smile Identity assists clients in reducing fraud and onboarding new customers more efficiently. According to the company’s research, “State of KYC in Africa,” fraud rates on the region reached an all-time high of 28% last year. According to the research, the most prevalent attacks involve fraudsters presenting fraudulent or stolen ID numbers or altered papers such as driver’s licences, passports, and national IDs. Or there are face mismatches, which occur when facial biometrics do not match the legitimate IDs. So, how is Smile Identity assisting its clients in detecting this fraud? Identity verification, digital KYC, user onboarding, liveness checks, face verification, document verification, and anti-fraud checks are all included, but the most significant feature is identity data deduplication.
The majority of the fraud that Smile Identity detects on behalf of its various clients in the payments and money transfer arena occurs during the account opening or onboarding stage, where clients have reported countless incidents similar to the one described above. The deduplication product ensures that when end users sign up for a client’s platform, they are required to take a picture against their IDs, allowing the client to better identify the consumer using their faces and reject future new sign-ups in the case of fraud.
“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.
Smile Identity’s new Document Verification product launch has allowed it to increase its capabilities; the company can now cover a billion identities and verification processes internationally, according to the CEO.
“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.
Straub also mentioned that Smile Identity processed over 30 million identity verifications in 2021, which is more than half of the KYC checks the business has recorded since its inception: over 50 million. The KYC verification startup claims to do between 2 and 2.5 million monthly identification checks and has more than doubled its client list since 2021, serving over 100 firms in banking, fintech, education, agriculture, and e-commerce.
Smile Identity has also expanded its Business Verification (KYB) solution, which now includes 30 detailed business lookups, including registration number, incorporation, directors, beneficiaries, and proprietor status. Currently, the product is offered in Nigeria, Kenya, and South Africa. Straub states that during the last year, Smile Identity increased its clientele by more than 100% across all products and tripled its revenue.
The Series B funding means Smile Identity has more work to do, but its smaller competitors (Youverify and YC-backed Identitypass and Dojah) have their work cut out for them to challenge the Costanoa-backed upstart as the market leader. While Smile Identity has an advantage as a sort of first-mover with strong ties and expertise on the ground, having debuted years before rival startups, Straub says the firm is a market leader because of “an exceptionally diversified workforce and best-in-class technology.”
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“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.”
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert.
As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard