This article was submitted to TechCabal by Chinyere “Chi” Nnadi. Chi is the founder of Mara, Africa’s premier regulated cryptocurrency exchange and lending platform.
It might not look like it, but Africa holds many opportunities for financial inclusion and cashless payment technology adoption. Even now, cryptocurrencies are solving region-specific problems via cross-border payments, sending money within and beyond the African continent, not to mention helping with currency devaluation and other pressing issues on an individual level. High unemployment rates have been plaguing many African countries. Younger, forward-thinking citizens keep looking towards crypto and the blockchain space for viable job opportunities and, ultimately, to help them and their families get a step closer to financial freedom. But there is one major obstacle.
According to a recent World Bank Group report, an estimated 1 billion people worldwide are having trouble proving who they really are. Roughly 80% of them are living in sub-Saharan Africa and South Asia. Indeed, Africans very often have to spend exorbitant amounts of time trying to manually prove or verify their identity in order to gain access to bank accounts, loan opportunities, fintech platforms, SIM cards, or public welfare services. An estimated 500 million African residents do not possess a formal identification document at all.
India has already solved these issues
Just a little over a decade ago, India was experiencing these same proof-of-identity challenges. Determined to solve these issues once and for all, the country designed and set in motion the India Stack in 2009. A unified software platform, the “stack”, provided governments, businesses, startups, and developers with software APIs enabling automatic identification, verification, and authentication features seamlessly across several key industries.
Suddenly, KYC (know your customer) procedures and digital document signing became possible online. People in India could share and verify documents across public organisations and government institutions, proving things like birth certificates and educational credentials with ease. This unlocked a hitherto untapped potential for innovation and entrepreneurship across the Indian subcontinent, fundamentally altering all kinds of financial services and virtually jumpstarting a variety of sharing-economy opportunities in India.
While India has successfully advanced this approach, expanding it onto other areas of daily life, Africa has mostly played catch up. The majority of African businesses still find the manual onboarding process for new customers to be quite daunting. The same goes for onboarding employees. An enormous amount of time and extra effort is still being spent on unnecessary processes and paperwork. Unnecessary because camera-equipped smartphones have flooded the African market these past few years, along with a new wave of innovative face-recognition algorithms and third-party KYC mobile apps, helping to make these processes automated.
Indeed, automating KYC procedures via smartphones would significantly reduce illegal activities across the continent. Human eyes alone cannot detect document forgery and are more likely to make an error, especially when reviewing documents and verifying the identities of someone from a different age or ethnic group. Modern KYC algorithms can almost eliminate these risks while enabling logging of the information and reducing the manual effort required. Essentially the same identity checks that are required by law (confirming that the person in question is indeed the person owning the ID document and also confirming document authenticity) can now be automated. It is not a question of changing the law, it is simply recognising that the technology can perform the same things required by law, but with better accuracy and speed.
Collaboration is key
Providing state-of-the-art KYC processes to African citizens and businesses is only one side of the coin, however. Updating the regulatory landscape regarding KYC requirements and optimising governmental policies across the continent would enable fintech and crypto enterprises to flourish and thrive in a secure and compliant manner. Trust-building and positive user experiences are essential to boosting the African digital economy. We should all be striving to achieve the correct balance between customer expectations, business prerequisites, and regulatory needs.
About Chinyere “Chi” Nnadi
Nnadi was the founder and former CEO of Sustainability International, a non-profit that combines biotechnology, impact monitoring, transactional transparency, and a win-win enterprise model to catalyse effective development projects in Africa. He also co-founded Sela, a blockchain-based impact project verification tool. He previously consulted with the Boston Consulting Group and pursued his MBA at the Wharton School of the University of Pennsylvania.
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