When Ada, a 27-year-old entrepreneur in Lagos, opened a new bank account last year, she wasn’t surprised when she was asked for her Bank Verification Number (BVN), national ID, and a quick selfie. What seemed like routine steps were actually part of one of the most critical processes in modern finance: Know Your Customer (KYC).
Across Africa, where fintech and modern financial services are rewriting how millions save, borrow, and transact, KYC is the gatekeeper. Regulators see it as the first line of defence against fraud and money laundering. Fintech founders, meanwhile, see it as a necessary, though often costly, bridge to customer trust.
How KYC turns sign-ups into safe transactions
At its simplest, KYC begins with identification, typically requiring an ID card, a passport, or even a utility bill. But the process quickly expands into biometric matching, database checks against Politically Exposed Persons (PEPs), and ongoing monitoring of transactions.
Increasingly, these checks are automated by AI-driven platforms, cutting onboarding times from days to minutes.
Building payments momentum in a continent short on IDs
The continent presents a paradox. On one hand, millions remain outside formal ID systems, complicating verification. On the other hand, digital innovation is racing ahead, with startups like Smile ID, VerifyMe, and Dojah offering “KYC-as-a-service” solutions tailored for African realities.
Governments are also responding: Nigeria’s Bank Verification Number (BVN) system and Kenya’s Huduma Namba aim to create unified digital identities that can plug directly into financial services.
But challenges remain. Fragmented databases, high compliance costs, and fears of excluding low-income populations without IDs mean KYC is still a friction point.
How KYC really works
At its heart, KYC is a process of verifying identity and assessing risk. It unfolds in a series of steps that, while invisible to most users, make the difference between a safe financial system and one ripe for abuse.
- Data Collection – Customers submit ID documents (national ID, passport, driver’s licence), sometimes coupled with proof of address.
- Document Validation – Financial institutions employ a combination of manual checks and technology, such as Optical Character Recognition (OCR), to verify that documents are authentic and not forged.
- Database Cross-Checks – Customer data is compared against sanctions lists, government registries, and databases of politically exposed persons (PEPs).
- Biometric Verification – Selfies are matched against ID photos, and in some countries, fingerprints or iris scans are used.
- Ongoing Monitoring – Even after onboarding, accounts are continuously monitored for unusual transactions.
These steps can sound bureaucratic, but technology is transforming them. AI models now flag anomalies in real time, APIs link fintech apps directly to government ID systems, and biometric verification has reduced onboarding from days to minutes.
Why KYC is non-negotiable for growth
For Africa’s fintech revolution to be sustainable, KYC isn’t optional. It’s the invisible infrastructure of trust. Without it, fraud and money laundering thrive. With it, cross-border trade, remittances, and digital savings platforms can grow with confidence.
And for Ada? Completing her selfie check took less than two minutes. Her fintech wallet was live instantly. For her, KYC was just a small hurdle. For the continent, it is the hidden machinery powering a financial transformation, the quiet but essential process that decides who gets to participate in Africa’s digital future.
What KYC really means
For many people, KYC feels like a checklist: upload an ID, take a selfie, maybe sign a form. But behind that simplicity lies a layered system designed to answer three critical questions: Who are you? How risky are you? And how should we treat your account going forward?
Financial institutions usually break this into three levels:
- Customer Identification Program (CIP): This is the most basic level, confirming that you are who you say you are. It’s where documents like passports, national IDs, or proof of address come in.
- Customer Due Diligence (CDD): Once identity is established, banks and fintechs ask: What’s the risk profile of this customer? A student opening a small savings account is treated differently from a businessperson moving large sums across borders.
- Enhanced Due Diligence (EDD): For high-risk customers, politically exposed persons (PEPs), cross-border traders, or individuals linked to flagged jurisdictions, extra scrutiny kicks in. This might mean more detailed background checks, tighter transaction monitoring, and sometimes face-to-face verification.
These layers are embedded in the guidelines of bodies like the Financial Action Task Force (FATF) and codified at national levels (central banks, regulators). KYC isn’t only a regulation; it is risk management, fraud prevention, and a way to build trust in digital financial ecosystems.
Per Derin Adefulu, Chief Compliance Officer at emPLE Group essence of a tiered/risk-based KYC process presupposes that for lower risk customers, it will definitely expand access due to the simpler requirements.
“However, fraud losses will be kept in check with safeguards like transaction thresholds. Which, in my opinion, is key is to strike the right balance between inclusion and fraud losses.”
In many African countries, regulators have adopted tiered systems. Nigeria’s Central Bank has defined multiple KYC tiers: lower tiers for minimal functionality and low risk, higher tiers for full banking access and higher limits. South Africa’s FICA framework is risk-based, meaning the level of scrutiny depends heavily on risk profile rather than a one-size-fits-all method.
How KYC verifications work – Step by Step
Ada’s sign-up looks simple on the surface: scan an ID, take a selfie, you’re in. Under the hood, a tightly choreographed workflow is firing to answer three questions: who are you, how risky are you, and how should we treat your account over time?
| Step | What Happens | Technology / Process | Where It’s Hard |
| 1. Capture and Onboarding | Ada uploads a government ID (national ID or passport), enters name, date of birth, address details. Sometimes takes a selfie. | Apps use image upload UIs, validity checks (file format, legibility) | Poor lighting, low resolution cameras, unstable networks, incomplete address fields |
| 2. Document Validation & Authenticity | Check that the ID is genuine: security features, microprint, holograms, MRZ (machine readable zone), expiration date etc. | Optical Character Recognition (OCR), forensic document template matching, human review when automated checks fail | Forged or high-quality composite IDs, inconsistent formats, rare document types |
| 3. List Screening | Cross-check against sanctions lists (UN, OFAC, regional), PEP databases, and watchlists. | Automated APIs or databases, fuzzy name matching, name-alias detection | Name variations (spellings), lack of unified PEP lists regionally, and transliteration issues |
| 4. Biometric Match & Liveness | Match selfie/photo to ID photo; ensure that the selfie is “live” (not a photo of a photo, video loop, or deepfake) using active liveness detection (blink, head turn etc.) | Facial recognition algorithms, liveness detection standards (e.g. ISO/IEC 30107-3) | Edge devices failing liveness, facial recognition bias, lighting/angle issues, fail rate annoy genuine users |
| 5. Risk Scoring / Tier Assignment | All the collected signals (documents, biometrics, device data, transaction intent) are fed into a risk model. Lower risk = lighter friction; higher risk = more checks. | ML / rule-based risk engines; thresholds for account limits, monitoring frequency | False positives/negatives; over-restricting good customers; calibrating thresholds with real-world fraud data |
| 6. Decision & Record-Keeping | Based on risk, decide to approve, request more info, or decline. Keep audit logs, versioned documents, user consent, and encryption. | Secure storage, data protection laws, encryption, access controls, privacy, and regulatory reporting | Data breaches, privacy concerns, cross-border data flow, and disputes over decisions |
| 7. Ongoing Monitoring | Even after onboarding, transactions are watched for unusual spikes, geolocation anomalies, changes in behaviour. Re-verification may be triggered. Also periodic updates of documents. | Transaction monitoring systems, anomaly detection, re-KYC triggers, alerts, regulatory reporting (Suspicious Transaction Reports) | Maintaining real-time monitoring, cost of keeping up, balancing privacy vs oversight |
1) Capture: the basics (CIP)
Ada uploads her national ID and types in core details (name, DoB, address). This fulfils the Customer Identification Program piece of KYC – establishing identity using reliable, independent sources. Banks and fintechs are required to do this under global AML standards.
2) Document checks: real or forged?
The app extracts and validates data from Ada’s ID (think OCR plus template/security-feature checks). If anything looks tampered with, the flow halts for a manual review. (This implements FATF’s “identify & verify” requirement and record-keeping duties.)
3) List screening: are you sanctioned or a PEP?
Ada’s details are screened against sanctions lists and politically exposed person (PEP) databases. PEPs aren’t banned, but they trigger stricter controls under FATF guidance (Recommendations 12 & 22).
4) Biometric match + liveness
She’s asked for a selfie. The system compares her face to the ID photo and runs liveness tests to ensure it’s a real, present human, not a photo or deepfake. The industry standard for testing anti-spoofing is ISO/IEC 30107-3 (Presentation Attack Detection).
5) Risk scoring & tiering
All signals (documents, lists, biometrics, device/IP patterns) contribute to a risk score. Low-risk users may be approved instantly with lighter limits; higher-risk users trigger more checks (Customer/Enhanced Due Diligence). Regulators endorse a risk-based approach to ensure compliance doesn’t exclude low-income or thin-file customers.
For example, the Central Bank’s three-tier KYC regime, with lighter entry for low-value accounts (caps/limits), and progressively stronger checks for higher tiers, is a pragmatic template many build around.
6) Decision, audit, and records
The platform either approves Ada, asks for more information, or declines. Whatever the outcome, audit trails and KYC records must be retained and made available to competent authorities.
7) Ongoing monitoring (the part users don’t see)
KYC isn’t a one-and-done. Transactions are monitored for unusual patterns; certain events trigger re-verification. Industry guidance (e.g., Wolfsberg Group) stresses effective suspicious-activity monitoring as a core pillar of financial-crime risk management.
These steps are largely standard, but implementation details vary widely across countries depending on regulation, infrastructure, and technical maturity.
It’s easy to talk about these steps in theory, but what does it look like on the ground?
Expert view in practice
Amechi Koldsweat, Head of Digital Banking at Lapo Microfinance Bank, offers an insider’s view of the frictions fintechs still face
“Digital account opening should be as simple as showing an ID, taking a selfie, and submitting a few details. But in practice, especially in inclusive finance, we still face five persistent issues that slow genuine customers and expose institutions to risk,” he said.
“First, document authenticity; high-quality fake or altered IDs can fool basic image checks, meaning more manual review and delays for honest people.
Second, selfie liveness face match is common, but proving the person is really there is harder. Photos, recorded videos, or AI clips can trick weak checks while overly strict settings wrongly fail good customers.
Then there are name and address mismatches. Real people get tripped up by spelling differences and informal addresses across IDs, SIM registration, and utility bills. Small inconsistencies create big friction. Phone number and device risks are another challenge – shared phones, recycled numbers, and SIM swaps make it hard to trust a phone as a unique identity. One number may not always equal one person.
Finally, connectivity and usability hurdles mean poor network, heavy photo uploads, and confusing forms lead to drop-offs, especially for customers using affordable devices and data plans.”
He advocates for a layered approach: “Combine document checks, strong liveness, and device behavioural risk, don’t just tighten one control. Use modern liveness with simple head turns or blink prompts that are easy for customers and hard for fraudsters. Accept common name and address variations without lowering standards through fuzzy matching with local context.”
He closes with a reminder that ties it back to inclusion:
Digital onboarding is the front door to inclusion and trust. Let the right people in quickly, keep the wrong actors out, and do both with dignity.”
The software stack behind Africa’s fintech boom
If Ada’s journey through KYC feels fast, it’s because technology has quietly transformed what used to be a painfully manual process. Just a decade ago, customer verification meant walking into a bank branch with photocopies of IDs, utility bills, and passport photos. Today, most of that work is invisible, outsourced to software, APIs, and increasingly, AI.
AI & Machine Learning
Artificial intelligence now powers much of the heavy lifting. Algorithms spot anomalies in documents, flag suspicious behaviour in real time, and detect patterns that human reviewers would miss. For instance, AI can identify subtle signs of tampered IDs or match a selfie to an ID photo with remarkable accuracy. This is crucial in African markets where fraud attempts, from synthetic identities to AI-generated deepfakes, are growing more sophisticated.
APIs & Integrations
APIs (application programming interfaces) are the plumbing behind digital KYC. A fintech app in Nairobi doesn’t need to build its own identity database; instead, it plugs into Kenya’s Integrated Population Registration System (IPRS) or Huduma Namba, allowing instant cross-checks.
In Nigeria, APIs tap into the Bank Verification Number (BVN) or the National Identification Number (NIN) databases. This reduces onboarding time from days to minutes.
- In many cases, fintechs also use telecom and SIM registration databases, utility bills, or address verification services via APIs.
- Governance of APIs is key: security, privacy, rate limits, logging, and data protection laws (like Nigeria’s NDPR, Kenya’s Data Protection Act) must be observed.
Expert view in practice
emPLE Group’s Derin Adefulu believes that in the real world, you can’t escape cultural nuances:
“In my experience, the governance gaps will be linked to cultural challenges. In theory, it is useful for this connection to be in place; however, in practice, there could be a distrust and concern stemming from the risks of the maturity levels of the API connections,” he argues.
“There’s also the data protection and privacy risks associated with the same, and a cultural distrust of government stemming from proven inefficiencies and integrity issues. In addition, if there is no clear level playing field or standard, then the governance gaps will also vary depending on the standards at play.”
Biometrics
Biometrics have become the continent’s KYC ace. Fingerprints, iris scans, and especially facial recognition are increasingly common. They serve two purposes: improving accuracy where documents may be unreliable, and reducing friction for users who don’t have paper records.
Nigeria’s BVN is biometric-based, and in South Africa, banks rely heavily on face and fingerprint recognition to comply with the Financial Intelligence Centre Act (FICA).
Blockchain & digital identity experiments
Some African governments and startups are experimenting with blockchain for secure, shareable digital IDs. The idea is that a verified identity could be stored once, then reused across banks, fintechs, and even cross-border. The Smart Africa Alliance is championing this at a pan-African level, though it’s still early days.
These technologies are more than buzzwords; they’re the difference between exclusion and access. For a boda-boda driver in Kisumu or a small trader in Kano, digital KYC powered by biometrics and APIs means they can open an account on their phone in minutes. And for regulators, the same tech means stronger oversight without strangling innovation.
Data security & privacy
- KYC requires storing sensitive data (IDs, biometrics). Laws in many African countries are being strengthened (Nigeria’s Data Protection Regulation, Kenya’s Data Protection Act) to force encryption, secure storage, breach reporting, and data location constraints.
- Regulatory frameworks like the Revised Regulatory Framework for BVN Operations in Nigeria require that BVN data be stored within national borders and secured with encryption.
Real-time monitoring & feedback loops
- KYC is not “once and done”. Good systems monitor transactions continually. If a user suddenly sends/receives large sums, uses a new device or IP, or changes behaviour significantly, the system triggers re-verification or flagging.
- Feedback loops (customer support, manual review) help adjust risk models and reduce false rejections.
Expert view in practice
Babatunde Hammed, Head of Global Operations at Chimoney, emphasises the KYC’s importance across jurisdictions:
“KYC is crucial for any payment processor and technology company to be compliant in various jurisdictions. We need to verify the identity of various customers we onboard into our products, and KYC serves as a tool to do this.
In addition, it is essential to work with an industry-standard KYC provider to conduct all identity checks and AML screening on users.”
Gaps and breakthroughs: Engineering KYC for Africa
Across Africa, the opportunities are vast, but the obstacles are forcing creative workarounds and new models.
Legal Identity Gap
- According to data from UNECA / ECA, about 542 million people in Africa do not possess identity cards. Some 95 million children under age five have never had their births recorded; around 120 million children have no birth certificate.
- The lack of identity documents excludes people from banking, formal work, voting rights, accessing social services, or even getting a SIM.
Mack Seck, the Chief of Technology and Innovation at the ECA, advocates for a comprehensive and collaborative approach to implementing digital ID systems, recognising that each African country has specific needs and challenges. He stresses the importance of regular assessments and adjustments based on feedback and changing circumstances to ensure successful implementation.
Fragmented and weak Systems
- National ID systems in many countries are underutilised or inconsistently deployed. Centre-of-government registries sometimes have outdated info, are inaccessible in rural areas, or are siloed.
- Address verification is especially problematic: informal settlements, no street addresses, name mismatches between ID vs other documents.
Cost, infrastructure & user experience
- Poor network connectivity, limited broadband or mobile data, low-cost devices with weak cameras, user interface issues in apps, and uploads failing.
- The cost of compliance: fintechs must invest in document forgery detection, human reviewers, and expensive biometric data capture. For smaller players, this can be a substantial share of operating costs.
Trust, privacy & cultural barriers
- People are wary of providing sensitive biometric data, as they distrust government data handling and potential leaks.
- Governance issues: who holds the data, how consent is obtained, how data is used, and who can access it (law enforcement, etc.).
The make-or-break layer for scaling finance in Africa
KYC is not a box-ticking exercise. It is the invisible glue under which Africa’s digital finance ecosystem can scale, earn trust, and bring in millions more users without blowing up in fraud, exclusion, or systemic risk.
Some key reasons why KYC matters:
- Trust & Safety: Users are more likely to adopt digital financial services if fraud is low and institutions reliably protect data. Scandals around identity leaks, account takeover, or money laundering can undermine entire systems.
- Regulatory Approval & Capital: Investors, partners, and regulators demand strong KYC and AML (anti-money laundering) protocols. A fintech without credible KYC is high risk for both regulation and investment.
- Financial Inclusion: Done right with tiered KYC, mobile-friendly verification, recognition of informal addresses, and flexible identity proofs, KYC can enable access for millions who otherwise remain excluded.
- Cross-border & Ecosystem Growth: Many African fintechs are looking to expand regionally. Standardisation, interoperable identity frameworks, and strong KYC practices make this easier (and safer).
- Sustainability in Risk Management: Fraud isn’t static. As threats evolve (deepfakes, synthetic IDs, AI-powered spoofing), so must the technical, operational and regulatory guardrails.
