Costanoa Ventures and Norrsken22 back Smile Identity in $20M Series B round • TechCrunch

Image credit: Smile identity

The importance of KYC and identity verification in a growing fintech landscape like Africa’s cannot be overemphasized. As thousands of financial institutions serve millions of Africans, strict regulatory requirements are needed to keep hackers and fraudsters at bay, which is why investor interest in startups offering KYC and identity verification services is increasing.

Smile identitya significant player providing ID verification and KYC compliance for African faces and identities highlights this trend. It just received $20 million in Series B funding to advance its expansion plans, including roadmap activities.

The startup announced a $7 million Series A investment in July 2021. Silicon Valley investor Costanoa Ventures, one of the co-leads in that round, also led this recent Series B round with Africa-focused venture capital firm Norrsken22. Lexi Novitske, general partner in Norrsken22, will join the company’s board.

Participating investors include e.gexisting ones such as ValueStream Ventures, Intercept Ventures, Latitude, Future Africa and 500 Fintech – and new backers such as Commerce Ventures, Courtside Ventures and Two Culture Capital. The African The KYC onboarding and identity verification platform has received more than $30 million from investors since Mark Straub and William Bares launched it in 2018.

In a statement, Smile Identity said the funding round will accelerate the development and deployment of its AI-powered identity verification technology, increase hiring efforts in East, South and West Africa with a focus on product and engineering, and expand into new markets, particularly Francophone and Arabic-speaking countries . The company hopes the war effort will allow it to work closely with ID authorities and authorities to create consumer consent standards and enforce local African data protection laws across the continent.

Smile Identity helps customers reduce fraud and integrate new customers more effectively. A report by the company, “State of KYC in Africa,” noted that the fraud rate on the continent reached a record high of 28% last year. The most common attacks, the report says, involve fraudsters providing fake or stolen ID numbers or altered documents such as driver’s licenses, passports and national IDs. Or facial errors, where facial biometrics do not match the valid IDs. So how does Smile Identity allow its customers to catch this scam? It is a combination of different products: identity verification, digital KYC, user onboarding, liveness checks, face verification, document verification and anti-fraud checks, but most importantly, identity data deduplication.

Most of the fraud that Smile Identity is flagging – on behalf of its many clients in the payments and money transfer space – occurs at the account opening or onboarding stage, where clients have reported a number of situations like the one mentioned earlier. The deduplication product guarantees that when end customers log into a client’s platform, they are mandated to take a selfie upon onboarding against their IDs, facilitating better customer identification using their faces and rejecting subsequent new registrations in case of fraud .

“If you onboard a customer and don’t check biometrics, you could be missing 50% of the fraud. The biometric deduplication engine [our smart selfie]which is trademarked as our facial recognition technology, can be used both at onboarding and at the stage of deduplication and authentication, Straub said during the call.

When we covered the six-year-old company 18 months ago, it had access to more than 250 million identities and verification for 15 different ID types across six African markets, while performing over 1 million identity checks monthly. However, the recent launch of the document verification product has enabled Smile Identity to expand its capabilities; now it can cover a billion identities and verification processes globally, the CEO said during the interview.

“The interesting update that we have is the document verification, which analyzes a document’s image and compares it to the user’s supplied selfie. And with that product, we can cover all of Africa. So, you know, instead of covering 250 million people, we can cover 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 CEO.

Another area of ​​growth, Straub noted, was Smile Identity processing over 30 million identity verifications in 2021; that’s over half of the KYC checks the startup has registered since inception: roughly 50 million. The KYC verification upstart, which has since doubled its customer base since 2021 and now serves over 100 businesses in banking, fintech, education, agriculture and e-commerce, also claims to perform between 2 to 2.5 million monthly identity checks.

Smile Identity has also expanded its Business Verification (KYB) solution, which involves 30 detailed business lookups such as registration number, incorporation, board members, beneficiaries and ownership status. The product is currently available in Nigeria, Kenya and South Africa. Straub claims that Smile Identity grew its clientele across all of these products by more than 100% over the past year and tripled its revenue within the same time frame.

The Series B cash infusion means there’s more work to be done by Smile Identity — but for its smaller competitors (Youverify and YC-backed Identitypass and Dojah), they 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 kind of first-mover with deep relationships and on-the-ground expertise, having launched years before other startups, Straub says the firm — now present in over 10 countries after recently opening offices in London and Cape Town — is the market leader due to “an incredibly diverse team and best-in-class technology.”

“We bring these two things together and focus on delivering the best results for our clients,” he added. “The results are measured by coverage of all the different types of identities and countries, pass rates, optimization of user journeys, appropriate matching,” he added. “Mall African countries are now adopting their data protection regulations. It’s challenging to keep up with all of this if you’re operating in five or six markets, especially if you’re running digital financial products. We’re trying to simplify all of that, put it into software and make it available to your developers, so you can integrate our software and start acquiring customers while protecting yourself from fraud and staying compliant from day one.”