e-KYC: The Key to Digital Financial Empowerment in Africa

Digital financial solutions have been the answer to the barriers to accessing banking services in African countries. Some of these barriers are irregular or informal incomes, lack of identity documents, and geographical remoteness. The key to sustainable digital financial products in Africa is an e-KYC management system with smart biometrics solutions.

The underdeveloped infrastructure presents yet another challenge that stops most common KYC software solutions in the global market from solving these problems using plug-and-play techniques. However, smart biometrics enable African financial institutions to develop local, digitized, and tailored e-KYC solutions to validate their customers’ identities. It helps them fulfill regulatory requirements and protect assets against prevalent fraud in Africa.

According to a study, 85% of Nigerian banks spend up to $1 million annually to perform KYC activities manually. Besides, a significant part of the customer base never completes this manual KYC process because they are time-consuming. Thus, digitization of the KYC process becomes important. Let’s see how e-KYC solutions with smart biometrics can contribute to digital financial upliftment in Africa.

Why Switch to e-KYC Solutions?

The banking and financial services industry leverages biometric technology to counteract security threats and meet updated know-your-customer (KYC) and anti-money laundering (AML) standards. The traditional KYC uses safeguards like two-factor authentication and passwords to verify customer identity.

The e-KYC is more secure, efficient, and accessible through smart biometrics solutions, like fingerprint, facial, iris, palm, and voice recognition models. Electronic KYC innovations have become a necessity in Africa to address the issues of high variability in the quality of national IDs and inadequate addressing systems to increase financial inclusion:

Lack of National IDs

A lot of Africans don’t have a registered form of identity, since many countries fail to register people at birth and deliver physical IDs. As a result, identity verification services like Onfido and Jumio end up with high rejection rates on the continent because users can’t produce physical ID cards, or the one they have is difficult to verify digitally. The e-KYC management system with smart biometric databases can help drive change if financial organizations collaborate with the government.

Ethno-centric Biometrics

The western machine-learning algorithms used in the face-recognition process don’t always work in Africa. These algorithms cannot recognize non-Caucasian faces, as it has been found that their poorest accuracy occurs in black female subjects. A more advanced, local e-KYC software solution like ‘Smile Identity’, which makes up an optimized algorithm to recognize black people more reliably has addressed this problem.

Inadequate Address Verification Systems

Most of Africa lacks proper addressing systems. The unnamed streets and buildings lead to many people having no formal physical address and lack of to-the-door postal service. A digitized e-KYC solution and Global Positioning System (GPS) can be helpful here, as it is remotely accessible and cheaper than physical visits to a customer’s home.

Benefits of e-KYC Innovations Aimed Towards Digital Financial Upliftment in Africa 

Reduced Hurdles to Customer Onboarding

The adoption of electronic innovations and e-KYC management system speed up the client onboarding process through quick cross-checking of customer identity with financial, employment, and public record. It streamlines the process by reducing the KYC stringency that comes with document verification.

Smart biometrics solutions such as fingerprint or facial recognition allow the harmonization of KYC requirements across providers. It further enables risk-based, tailored, and simplified KYC requirements, alleviating the due diligence burden for customers while opening new accounts, remotely or otherwise.

Securing and Modernizing Mobile Banking Solutions

The financial industry in Africa is increasingly moving towards contactless digital solutions because of poor infrastructure. Smart biometric verification in mobile platforms diminishes concerns about confidential information being intercepted.

The e-KYC solution with smart biometrics enables edge-based facial recognition deployment in mobile applications. It eliminates lag from cloud-based processing by sending only small, encrypted templates for validation to a database hosted on the server. It helps customers move beyond daily banking transactions, allowing them to apply remotely for additional products like loans or securities accounts within a few seconds.

Easy Access to Remote Transactions

Apart from the reduced cost of documentation and easy enrolment of individuals, e-KYC can be leveraged to provide remote financial services. KYC innovations have introduced Nigeria's Bank Verification Number (BVN) system.

The BVN identification system uses smart biometric tools to assign customers a unique number. BVN-enrolled customers can then quickly execute any transaction from anywhere in the world with the highest level of security enabled by facial, iris, and fingerprint recognition. For example, if a customer wants to open a brokerage account via their smartphone, they can do it in no time using a phone camera to capture facial vectors and BVN.

Inclusive Financial Integrity

Many African countries have no explicit concept of 'identity’. Here, the regional central banks, in partnership with respective ministries of finance, can use an e-KYC management system to increase financial inclusion by introducing enhanced legal frameworks for identity.

This new KYC regime emphasizes the development of the digital payment ecosystem that extends its services to the youth, women, SMEs, and rural areas through agent networks. Financial institutions can adopt these new regulatory KYC requirements to include the most vulnerable and underserved groups without compromising their ability to combat crimes.

It's Time Africa Leapfrogs Its Financial Services Challenges

Africa has witnessed widespread adoption of digital financial solutions since the emergence of fintech companies. The lack of physical ID cards, proper addressing systems, and formal KYC infrastructure has allowed Africa to develop local and digitized KYC software solutions using smart biometrics. With the adoption of e-KYC, Africa can leapfrog to a new global best practice for digital financial services with proactive fraud resilience.

Panamax offers a Smart Biometrics solution to help governments, enterprises, and API partners solve KYC issues with its robust record-keeping and management features.

This Article is Originally Published on Panamax Inc.