Africa Business Communities
Fraud attempts continue to rise in Africa, Smile Identity report reveals

Fraud attempts continue to rise in Africa, Smile Identity report reveals

A report released by pan-African identity verification company Smile Identity has revealed that fraud rates across the continent hit an all-time high of 28% in 2022.

The 2022 State of KYC (Know Your Customer) in Africa identifies fraud trends using nearly 50 million KYC checks run across countries and industries. The report says that since 2020, there has been a consistent rise in the percentage of attempts considered fraudulent or invalid.

“While the three-year trend suggests an upward trajectory of fraud, it’s interesting to note that the percentage of fraudulent attempts in 2022 declined slightly in the second half of the year. This is likely due to a reduction in incentive-based marketing campaigns as businesses slow their growth spend.”

At the same time, fraudsters have taken advantage of the changes in consumer behavior resulting from the pandemic, such as increased bank-to-mobile transactions and reliance on passwords and OTPs. Fraudsters use varied techniques to hijack personal data and use it to commit crimes.

“Private Telegram channels, WhatsApp groups, and hacker websites spread new strategies to rake greater rewards,” says the report.

Reference is also made to the high level of fraud witnessed during the pandemic as many people across the continent shifted to remote workspaces. Many businesses, the report says, did not know how to effectively verify users remotely. However, more African businesses have now adopted biometrics and use face recognition technology to verify and onboard users online in a fast and accurate manner.

The continent has also experienced growth in the Buy Now Pay Later(BNPL) industry which has helped expand access to goods and credit to merchants and consumers. However, this has created new opportunities for bad actors to build up a positive credit score before defaulting.

“It also allows fraudsters to commit account takeovers and get away with high-value items without transacting,” the report elaborates.

Stolen ID information, selfie “Spoofs”, duplicate accounts, and synthetic fraud are among the main types of fraud identified by the report. Synthetic fraud involves using computer vision algorithms to create face images that look like real people but are entirely fictitious. The fraudster then combines some real textual KYC information (often stolen) with these fake biometrics in order to open bank accounts, apply for loans, or make purchases, leaving banks and victims with a significant amount of debt.

Smile Identity concludes that in this digital era, “Knowing Your Customer” is not just about catching fraud. It is also about ensuring that real users successfully onboard and become valuable customers.”





Share this article