This past month has seen several African fintechs such as Flutterwave and Union54 make headlines for compliance checks and fraud issues. Both unlinked events re-emphasize the importance of know your customer (KYC) and anti-money laundering (AML) checks and why regulators enforce strict policies that financial institutions need to be held accountable to while operating across the continent and globally.
For the many startups whose services help keep the operations of financial institutions such as banks and fintechs in check, this period highlights their relevance more than ever. In the latest development, Youverify, a Lagos and San Francisco–based identity verification company helping African banks and startups automate KYC and other compliance procedures, is announcing that it has secured a $1 million seed round extension. The startup raised a $1.5 million round in 2020, bringing its total seed raise to $2.5 million.
Africa-focused VCs Orange Ventures and LoftyInc Capital, the two investors who co-led its initial seed round, also led the extension. Additional investment 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 attract more scrutiny from regulators. According to reports, transactions worth $116 billion will be made through digital payment channels this year, requiring stringent measures to prevent identity theft and fraud. Therefore, the rise in focus on maintaining transparency in financial regulations and improving strategies for KYC and AML by implementing regulatory technologies has become a significant growth factor for the market. And as regtech demand globally increases, so will Africa’s, with reports saying it will reach about $1.2 billion in the next five years.
Youverify came into 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 several financial institutions. Now it has added more KYC products and expanded into new markets such as Ghana, Côte d’Ivoire, South Africa, Kenya and Uganda.
“The way our customers see us is that we help them automate their KYC and compliance issues,” said Odegbami on a call with TechCrunch.
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 further explained that these offerings cater to issues some fintech platforms have faced recently: alleged AML issues in the case of Flutterwave in Kenya and Ping Express in the U.S. and fraud in the case of Union54’s chargebacks. In the latter, Youverify claims it could’ve prevented large-scale chargeback fraud by identifying the pattern of transactions to flag fraud, blocking the virtual cards and tying them back to fraudsters committing the multiple fake chargebacks.
“They [Union54] grew faster than they could put in place the proper transaction monitoring and fraud detection systems that will identify transactions happening from their customers,” the CEO said of the …read more