African Fintech founders have been urged to leverage the expertise of digital identity and KYC service companies to help them scale and mitigate fraud within their systems.

Esigie Aguele, Chief Executive Officer of QoreID, a pan-African-focused digital identity and consumer analytics data company, made the call while speaking during the seventh edition of the Inside Identity webinar series held recently.

Speaking on the theme, Beyond Compliance: Building a Stronger Defense against FinTech Fraud, Aguele counseled that engaging specialists, over building identity products in-house, will open FinTechs to the enterprise reporting environment offered by Identity/KYC companies which is the only layer able to establish a first trust transaction as well as give detailed insights in customer risk assessment, particularly at the point of onboarding.

According to him “One of the immediate drawbacks of not engaging KYC solutions providers is that Fintech companies are unable to access the enterprise reporting ecosystem that specialist stakeholders can offer. For instance, QoreID’s robust infrastructure stretches across 250 FinTechs, 16 commercial banks and 14 micro-finance banks and counting, across Africa. When we do Anti-Money Laundering (AML) and anti-fraud checks, we are always on the lookout for past suspicious activities which we may have flagged in the past across our network. This is something that in-house work cannot guarantee.

“There are also other long-term benefits to working with KYC specialists. The time and resources spent by FinTech engineers can better be deployed towards building innovative products for their customers so we always advise them to take advantage of our expertise.”

Agreeing, Anthony Onyango, Global Head of Portfolio at Lipa Later, a pan-African Buy Now Pay Later startup with presence in six countries, noted that, “there is no need re-inventing the wheel as startups are best served outsourcing to experts who have built capacity in the area and have the right resources for the job.”

He added “Most FinTechs try to do their KYC in-house but they quickly realize that they are incurring a lot of losses and capital expenditure in terms of planning. Looking at it from within the startup framework, my best advise will be for FinTechs to outsource so they can focus on their core business. This is because you’re looking at two scenarios – the ability to make a decision while managing a risk and then the ability for your clients to access your product or service anywhere. Some people have taken a lot of time to build the infrastructure, have the right resources and charge at little extra cost. In any case, you would have charged the service at a fee to customers so there is no replica effect.”

Superintendent Henry Ayisi Mensah, District Police Commander, Oyibi, Eastern Region, Ghana, called for a more collaborative approach towards working with security agencies. Additionally, he cautioned FinTechs to be deliberate in choosing a KYC partner with proven integrity and understanding of local standards.

He continued: “The security challenges FinTechs contend with evolve each day. These include issues around data privacy, big data, AI and blockchain integrations, compliance, lack of mobile and tech expertise, growth issues and effective marketing to acquire customers, user retention and user experience. It is therefore important for FinTechs to partner with trusted and competent KYC companies that have the right technology to secure their networks against criminal elements and also understand local data regulations.

“From experience, we know it is much harder for criminals to breach biometric systems which use individuals’ unique physical characteristics. While passwords can be lost and stolen, biometrics provide a stronger defense against identity theft. Companies whose systems have been breached should also report to the police immediately as it is usually more challenging to track criminals the longer they have time to close their tracks.”

QoreID is a digital identity and consumer analytics company providing KYC and critical consumer data to corporates across Africa. Launched in 2022,  the company currently operates in Nigeria, Ghana and Kenya.