By Chris Burt
KYC providers regularly claim the ability to onboard people from all over the world. Whether for financial inclusion or just market expansion, onboarding the billion people who remain without ID documents in the world remains a widely shared priority.
Startup AiPrise is working to bring together local vendors and deliver their expertise to businesses all around the world. Founder Chaitanya Sarda tells Biometric Update in an interview that smaller KYC and fraud prevention companies are better at serving their local markets than international vendors are.
The company raised $2 million in an October funding round led by Y Combinator and Okta Ventures, and started implementing its vision for a one-click KYC platform for vendor orchestration, Sarda says.
“No one company can solve the problem of KYC around the world,” he says, explaining AiPrise’s pitch.
There are over 1,700 formats of Brazil’s national ID card, since they are issued by 27 issuing jurisdictions and each year the format of several are updated. Further, there are major differences between how KYC can be carried out in a market like Brazil, compared with another like Ethiopia.
“Imagine you are a U.S.-based company trying to expand to Mexico, Brazil, Columbia. The biggest challenge for a fintech company is how to verify the users. All the players today,” Sarda says, mentioning several leading KYC providers. Most have emphasized the U.S. market. “They kind of work,” he says.
“But not in Mexico and Brazil. We realized that there are smaller companies in each of these geographies which understand every single data format, document format, understands the nuances, understand what kinds of fraud are people doing in these geographies, and they have built technologies according to that.”
The future of KYC with government databases
Governments are trying to make KYC easier, Sarda points out, with efforts like Aadhaar’s DigiLocker.
“Nobody needs to now offer a document of a selfie of themselves,” he says. “You put in a number, you get a one-time password, and you are good to go. In Nigeria, similarly, BVN number.”
There are now half a dozen countries where one-click KYC is possible, Sarda says, and they are among the most populous in the world.
Their approaches are not uniform, but seem to be trending in the same direction.
“Actually, governments have become very strict, in a way, which is good for both the user using the app, because they have more control over their data, and I only get the information I need to KYC. I don’t get a lot more information than I want.”
Bangladesh now returns simple yes or no answers to KYC queries, and Sarda sees this as the general direction of travel.
The company is also planning for “a network of users so that we can pre-use the KYC.” While it is not a focus yet, it is already possible in some smaller countries, Sarda claims.
“We are creating usable files in our databases such that in the future, if a user has been KYC’d in the past three months, we can give the option to the company: ‘Hey, do you want to use this individual’s KYC?’ And we’ll give you a yes or a no.”
To help customers around the world capitalize on these developments, AiPrise aims to figure out the right vendors to partner with in different geographies, and then partners with all of them to get different capabilities. So far, AiPrise has about 30 partners delivering local KYC and fraud prevention.
Individual KYC vendors tend to deliver auto-approval rates of around 85 percent, and fraud prevention providers block half or slightly more of attempts. In combination, Sarda says AiPrise can raise those rates to around 96 percent and 85 percent, respectively.
KYC and fraud prevention vendors use myriad data formats, which presents one of the main challenges with combining their services, according to Sarda.
The tradeoff is that local vendors not only have a better handle on things like new document formats, but also train their algorithms for local populations and variables like the mobile phone cameras that are common to the market.
“Those small things at scale matter,” he says.
This is important, because while one-click KYC without uploading an identity document is the ideal for AiPrise, it is still a ways off in many places, and not enough to satisfy regulations in some verticals. Crypto companies tend to deal with less regulation than neobanks, for example. For this reason, AiPrise offers a full suite of capabilities, including selfie biometrics and liveness checks.
The local focus remains critical though, Sarda says. When Brazil launched its digital drivers’ license, the world’s biggest KYC vendors took months to support it, while local vendors were ready on the first day.
Countries that have put in the work on their digital ID systems, like Nigeria, India, Mexico, Brazil, and Argentina have better ID infrastructure than others, like the U.S. He thinks most, however, are at some stage of working towards easier KYC.
“The good thing is a lot of development is happening right now as we speak, and I can imagine in the next four years, all of these countries will have world class infrastructure for ID verification, paving the way for a lot more inclusion.”
This post was updated at 8:54am Eastern on April 27, 2023 to reflect that Brazil is made up of 26 states and one federal district.
Source: Biometric Update
Chris Burt is managing editor and industry analyst at Biometric Update. He has also written nonfiction about information technology, dramatic arts, sports culture, and fantasy basketball, as well as fiction about a doomed astronaut. He lives in Toronto. You can follow him on Twitter @AFakeChrisBurt.
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