Smile Identity, a digital identity and KYC (Know Your Customer) company, has acquired Inclusive Innovations, an identity verification company based in Ghana. Inclusive Innovations is the parent company of Appruve, which operates in the same arena as Smile Identity and offers ID verification for individuals and businesses. This acquisition will support Smile Identity’s on-ground expansion plans and the spread of its digital identity solutions across Africa.

Smile Identity offers automated document verification and authentication services, AML Compliance screening, biometric authentication, user verification and onboarding, and other fraud prevention security services to help businesses across Africa verify the identity of their users/customers before onboarding them into a product/system of value. On the other hand, Appruve focuses on connecting multiple databases to create a story around an individual or business. This technology is made accessible through APIs and SDKs to businesses and individuals.

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The World Bank’s Identity for Development (ID4D) toolkit states that almost half of the one billion people who lack identification globally are in Africa, which means that a significant percentage of Africans are excluded from economic and social benefits both locally and globally. Since 2017, Smile Identity has been providing digital identity verification services and security services to leading African companies including Paystack and OPay. The acquisition of Appruve’s parent company is a natural progression after years of partnership and collaboration between both companies in the African identity verification space.

Currently, the companies have reached a definitive merger agreement subject to regulatory and stockholder approval. The acquisition amount remains undisclosed. Key members of Appruve are now shareholders in Smile Identity, and most of the Appruve team is being kept onboard.

With this merger, both companies are working together to achieve the same goals collectively and more efficiently. They will continue to build and deepen their expertise on what solutions work across different markets with additional insights into the Ghanaian market from the Appruve team. The combination of talent and experience will also strengthen their broader understanding of the direction of KYC in Africa and their relationships with regulators and compliance officers in the public and private sectors on the continent.

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For customers, they’ll improve on the offerings that they previously enjoyed. Customers will be able to get access to all the services of both Smile Identity and Appruve and enjoy more robust solutions over time with expertise from both companies. With this acquisition, Smile Identity looks forward to helping customers access deeper and richer services including onboarding into payment systems (mobile money, bank accounts, international payments and remittance, etc.) both locally and internationally; stock trading and brokerage; business lending; and much more in the coming months.

Smile Identity’s acquisition of Inclusive Innovations, the parent company of Appruve, can be seen as a strategic move for several reasons:

1. On-ground expansion: The acquisition will aid Smile Identity’s on-ground expansion plans in key markets in West Africa where they want to invest more. This will enable the company to deepen its presence and increase its market share in these regions.
   
2. Synergies between teams: The acquisition will bring together the product engineering expertise of Appruve and the access to critical data sources that are important to Smile Identity. This will enable both companies to leverage each other’s strengths and create synergies that will benefit their customers.
   
3. Access to more datasets: Smile Identity and Appruve share a vision of which datasets across Africa are important. By merging forces, they will have access to a wider range of datasets, which will enable them to build more holistic profiles around people and entities they’d like to verify.
   
4. Deeper penetration in local markets: The acquisition will enable Smile Identity to deepen its expertise on what solutions work across different markets with additional insights into the Ghanaian market from the Appruve team. This will enable the company to build more robust solutions and strengthen its relationships with regulators and compliance officers in the public and private sectors on the continent.
   
5. Access to more customers: With hundreds of customers and 60 million identity verifications so far, Smile Identity is already moving the needle on onboarding and identity verification in Africa. With this acquisition, they will be able to offer more robust solutions to their existing customers while also gaining access to Appruve’s customer base.

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

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.

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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