In the first half of 2023, Ghana was at the forefront as African countries witnessed a significant decline in fraudulent onboarding attempts.
According to a report by Smile ID – a leading identity verification and fraud prevention service, the total number of fraudulent know your customer (KYC) attempts fell 5 points to 23 percent in the first six months of 2023, compared to a peak of 28 percent recorded in 2022.
The decline in fraud rates coincides with a notable decrease in start-up funding across the African continent. Venture funding experienced a sharp drop of over 50 percent year-on-year in H1 2023, and the number of start-ups that secured funding plummeted from 303 in H1 2022 to only 131 in H1 2023.
“This reduction in funding has led to businesses cutting back on marketing expenses – particularly incentive-based customer acquisition, which has shown a high correlation with increased fraud attempt rates,” the report noted.
Despite the decline in fraudulent onboarding attempts, the report said businesses and financial institutions must remain vigilant as cybercriminals continue to adapt their tactics.
While referral fraud rates have decreased significantly, malicious actors are exploring alternative avenues to exploit digital platforms and defraud other users or funnel illicit earnings, it added.
Based on insights gathered from conversations with clients, Smile ID reports that cybercriminals are now focusing more on targetting transactions rather than creating fake accounts. This highlights the importance of implementing robust security measures; such as multi-factor authentication, including biometrics, to protect against unauthorised access and fraudulent activities.
“As the digital landscape continues to evolve and digital onboarding becomes more standardised, it is imperative for businesses to prioritise the implementation of advanced security measures. Relying solely on traditional methods for KYC and fraud prevention may no longer suffice in deterring increasingly sophisticated cyber threats,” emphasised Smile ID.
Biometric verification has emerged as a significant contributor to reducing fraudulent users by a staggering 50 percent in 2023. As businesses and institutions increasingly adopt biometric Know Your Customer (KYC) methods, the impact on fraud prevention has been profound.
According to the report, 43 percent of ID frauds caught in 2023 were attributed to face mismatches, indicating the use of stolen or lost IDs. Additionally, 41 percent of fraudulent attempts involved selfie spoofs – whereby fraudsters attempted to deceive systems using manipulated or fake selfies.
These statistics highlight the importance of incorporating biometric checks in the identity verification process. Traditional textual verification methods have proven inadequate in identifying sophisticated fraudsters, making biometric measures essential in the fight against cybercrime.
Facial recognition, in particular, has emerged as the most preferred biometric KYC method worldwide. Its accessibility and security features have made it an ideal choice for businesses and organisations seeking robust identity verification solutions. By leveraging facial recognition technology, companies can ensure a seamless and secure user experience for their customers while mitigating the risks associated with identity fraud.
The advantages of biometric verification extend beyond fraud prevention. This advanced technology not only enhances security but also streamlines customer onboarding processes, reducing the time and effort required for verification while maintaining a high level of accuracy.
Several industries have witnessed remarkable benefits from implementing biometric verification. Banking and financial institutions, e-commerce platforms, healthcare providers and government agencies have all experienced increased trust and reduced instances of fraud after adopting biometric KYC solutions.
Biometric verification operates by analysing unique physical and behavioural traits such as facial features, fingerprints, iris patterns or voiceprints. These traits serve as irreplaceable identifiers, making it extremely difficult for fraudsters to impersonate genuine users.
“As the year progresses, the battle against cybercrime will require a collective effort from businesses, financial institutions and regulatory bodies. By remaining proactive and staying ahead of evolving threats, Africa can pave the way for a safer and more secure digital future,” added Smile ID.
