More people are coming online for the first time as mobile penetration in Africa grows. In turn, this has increased the market opportunity for startups, which try to provide various solutions to meet the financial needs of the populace.
To combat fraud, these businesses need to carry out certain identity verifications and KYC. Identitypass, a platform that powers KYC processes, has raised over two million dollars in seed funding after graduating from Y Combinator. The startup raised $360,000 in pre-seed investment last November, bringing its total funding to $3.1 million.
According to reports, African businesses lose $4 billion annually to cyber crime. The global figure is $1 trillion. Digital businesses in Africa need to perform stringent KYC and verification checks on their customers.
It wasn't the love for reducing the high rates of fraud that led the people at Lagos-based Identitypass to start the company. According to Lanre Ogungbe, the team was initially building a platform that required consumers to use face, fingerprints, or voice to make payments. They encountered issues while developing the platform. The decision to pivot was made.
There was no one in the market that had the kind of infrastructure that we wanted to use. We wanted to create a substitute. In an interview, the CEO said that was it.
The team reached out to the fintechs to find out how they solve the fraud and identity issues. Ogungbe said the feedback was a setup involving an in-house compliance team and thresholds on transactions. Customers would need to pass further investigative checks to make transactions above the threshold.
Ogungbe said that they knew it would never work for them because customers only had to fill in a few data points.
Identitypass approached various agencies and authorities countrywide to get licenses and certifications needed for authorizing checks across a full spectrum of verification points. It was launched in January 2020. 200 businesses are connecting to 18 data points to verify their customers identities on the platform. The businesses are located in Nigeria, the U.K., and the U.S.
The chief executive said that the core of the business is making it possible for digital businesses in Africa to easily verify and confirm that their customers are who they say they are.
The founder said that before Identitypass came into the market, someone could pick another person's BVN and use that to assess a loan facility.
Since launch, Identitypass has processed more than one million unique verifications. Government-approved IDs include national IDs, driver licenses, international passports, bank verification numbers, phone numbers, vehicle plate numbers, debit cards, security watchlists and tax history. Depending on the number of end points a business connects to, the identity and verification platform charges between 10 cents to 20 cents on every verification it executes.
The two-year-old company launched a new platform recently. Ogungbe said the new software gives Identitypass an advantage over other players in the market.
We're the only providers of both an API and a SaaS-based solution for verification, and that makes us different from everyone else. We have more data points than most providers in the region. No other player in the market uses data and biometrics the same way we do.
This confidence in being a market leader is propelling the company into new territory: selling to international clients. Mercury restricted the accounts of a few African startups due to compliance issues, according to the CEO on the call. He said Identitypass could be used to conduct checks on individuals and businesses from Africa.
Ogungbe said they would work with many regulatory agencies to develop a top-notch data security framework across Africa. We will work with multiple alliances and form more formidable partnerships in Africa.
Identitypass is powered by this seed funding and plans to expand its existing infrastructure, roll out new industries around compliance, security and data collection, and make new hires to its 14-man team. True Capital Fund is one of its investors.
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