In the past month, several African fintechs such as Flutterwave and Union54 have made headlines for compliance audits and fraud issues. Both unlinked events reiterate the importance of KYC (Know Your Customer) and Anti-Money Laundering (AML) controls and why regulators enforce strict policies that financial institutions must be held accountable for as they operate across the continent and globally.
For the many startups whose services help control the activities of financial institutions such as banks and fintechs, this period underlines their relevance more than ever. In the latest development, you verify, a Lagos and San Francisco-based identity verification company that helps African banks and startups automate KYC and other compliance procedures, announces it has secured a $1 million seed round extension. The startup raised a round of $1.5 million in 2020, bringing the total seed raise to $2.5 million.
Africa-focused VCs Orange Ventures and LoftyInc Capital, the two investors who led the first round of starting together, also spearheaded the expansion. Additional investments came from Octerra Capital, Plug & Play Venture, Syntax Ventures, HTTP Investors, Afer Group and Fronesyz Capital.
The proliferation of financial services in Africa is beginning to be under increasing scrutiny from regulators. According to reports, transactions worth $116 billion will be made through digital payment channels this year, requiring strict measures to prevent identity theft and fraud. Therefore, the increasing focus on maintaining transparency in financial regulation and improving strategies for KYC and AML by implementing regulatory technologies has become a key growth driver for the market. And as demand for regtech increases globally, so will Africa’s, with reports saying it will reach about $1.2 billion over the next five years.
Youverify entered Africa’s regtech scene when founder and CEO Gbenga Odegbami founded the company in 2018. Launched in the Nigerian market, Youverify first provided API for address and identity verification to various financial institutions. Now it has added and expanded more KYC products to new markets such as Ghana, Ivory Coast, South Africa, Kenya and Uganda.
“The way our customers see us is that we help them automate their KYC and compliance issues,” Odegbami said during a conversation with londonbusinessblog.com.
In addition to verifying identities beyond Nigeria’s Bank Verification Number (BVN) and addresses, Odegbami says Youverify layers KYC and compliance products such as transaction monitoring. He went on to explain that these offers address issues that some fintech platforms have experienced recently: alleged AML issues in the case of Flutterwave in Kenya and Ping Express in the US, and fraud in the case of chargebacks from Union54. In the latter case, Youverify claims that it could have prevented large-scale chargeback fraud by identifying the pattern of transactions to flag fraud, blocking the virtual cards and linking them back to fraudsters who commit the multiple false chargebacks.
“She [Union54] grew faster than they could set up proper transaction monitoring and fraud detection systems that can identify transactions from their customers,” said the CEO of the chargeback situation Union54 has been handling over the past few months. “A system like ours will be able to identify past and new patterns in such a way that we could have helped such a company.”
It was only last year that Youverify started working with fintechs. Initially, most of its customers were government agencies, large corporations such as Bolt, and banks. Nearly two-thirds of Nigeria’s commercial banks, such as Standard Chartered, Standard Bank and Fidelity Bank, use the platform’s identity verification and KYC products, Youverify said.
However, in an effort to serve more customers, the company launched its proprietary technology, Youverify OS (YVOS), which provides a single platform for automating due diligence, and combines risk and compliance management with its core identity verification platform to deliver these. fintechs an enterprise-grade compliance solution. Its other product, vFORM, a no-code tool, allows businesses to create a custom process for onboarding new customers using a drag-and-drop builder.
As a result of the diversification of its clientele and demand for its KYC products, Odegbami said Youverify’s customer base has grown by 300% to serve more than 400 banks and high-growth startups. In the past 24 months, Youverify’s application processes have grown by more than 1,000% to more than 5 million applications that have helped its clients hire talent, sell financial products and onboard remote drivers. The company’s YouID digital identity platform has added more than 500,000 users, with 600 service providers waiting in the marketplace across the continent. Odegbami said the Lagos-based identity verification company exceeded an ARR of more than $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 wasting words, Odegbami said his company is a “market leader” because it came to market much earlier and has more experience and offers more data sets than the others.
Over the next 18 months, Youverify plans to expand its presence to 30 countries, especially in the southern, eastern and French-speaking parts of Africa, where Odegbami says the company will recruit aggressively. It also plans to increase the number of IDs it can verify from 400 million to 2 billion, and develop new automated compliance products for the gaming, travel, healthcare and telecommunications industries.