Smile ID Exposes Risks & Looming AI Threat As Fraud Tactics Evolve In Africa

By  |  January 24, 2024

In the last two years, an overwhelming number of fraud attacks were directed at National ID cards, which accounted for 80 percent of all document fraud attacks in Africa, finds a new report by Smile ID, a company providing digital identity verification, fraud detection, anti-money laundering, and KYC compliance solutions to businesses in Africa.

Also, 12 out of the top 20 most attacked document types were National IDs, with the Kenyan ID being the most vulnerable at a 25 percent fraud rate, while 20 other National IDs in various African countries, including the South African Green Book and the Nigerian NIN Slip, among susceptible documents commonly exploited for fraudulent activity. The report suggests that national IDs are a popular target because they are the most common ID types.

In its 2024 Digital Identity Fraud in Africa Report which featured case studies from clients such as Flutterwave and Bridgecard, Smile ID examined data from over 100 million identity verification attempts using ID documents and biometric data across the continent. It also delves into fraudster methods, behaviours, regional trends, and business insights. It serves as a valuable resource for businesses combatting identity fraud in Africa.

The ongoing digitization drive in Africa aligns with increased fraud types, including digital identity fraud. Smile ID’s report spanning the last four years highlights a consistent yearly rise in digital identity fraud since 2019.

With a surge in reported breaches, businesses are urged to fortify their anti-fraud measures. The report emphasizes continuous risk monitoring and multi-authentication during high-value events. Mark Straub, CEO of Smile ID, underscores the importance of ongoing biometric authentication, especially during high-risk events, to curb account takeover and fraud on existing accounts.

“We see more fraud move away from abusing referrals and new account bonuses to account takeover and fraud on existing accounts. As such, businesses must perform ongoing biometric authentication on user accounts to ensure they are being operated by their rightful owners, especially during high-volume transactions, logins from new devices, and other high-risk events,” he commented.

The report also touches on various topics such as the prevalence of fraud with national IDs, regional fraud trends, industry-specific insights, strategies for building comprehensive anti-fraud systems, the rising threat of artificial intelligence to identity verification, and future developments in fraud prevention.

Some Highlights

Biometrics detect 4x more fraud: Businesses that rely on textual verification are 4 times more likely to be breached by fraudulent actors than their counterparts that rely on biometric authentication.

Payments fraud spiked: The payments industry suffered significant levels of fraud in 2023 with fraudulent verification attempts reaching as much as 42 percent in February and 35 percent in August.

Biometric fraud rate on the rise: Fraudsters are evolving their tactics. Q4 2023 saw a record-high 13 percent of biometric verification attempts marked as fraudulent.

Active liveness is key: 87 percent of biometric fraud caught is due to active liveness checks showing that selfies alone are insufficient.

Multi-factor authentication a necessity: Transaction fraud is rising, necessitating multifactored authentication across the entire customer lifecycle.

Gender gap closing: Gender inclusion is rising across all African regions as the percentage of women verified has increased from 10 percent in 2019 to 35 percent in 2023.

A quick glance at overall fraud rates across regions revealed the following:

  • Central and East Africa led the continent in average fraud rates throughout 2023 with peaks of 29 percent and 30 percent respectively.
  • Fraud rates in West Africa rose steadily over the year and peaked at 17 percent in October before reversing for the rest of the year.
  • Fraud rates declined in November and December (suggestive of companies running fewer promos) for all regions under consideration except Central Africa.

Importantly, the report also explores the impact of technological advancements like AI and machine learning and the increasing need for the continued evolution of digital identity verification methods, as well as discusses the anticipated regulatory shifts and their implications for businesses and consumers, setting the stage for a comprehensive understanding of the future fraud prevention landscape.

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