RelyComply, an anti-money laundering (AML) platform, and Spot Money, a South African mobile banking company, have expressed serious reservations about the news that South Africa’s Department of Home Affairs (DHA) plans to increase prices on ID verification API calls by more than tenfold.
The companies believe this move could undo years of progress in South Africa’s drive for digital financial inclusion by lifting the cost of each API enquiry from less than R1 to R10. Furthermore, should the steep price increase go ahead, it will impact the rollout of a centralised electronic Know Your Customer (eKYC) linked service, which relies on the DHA enquiry.
The DHA has retracted its pricing proposal. However, reinstating the price increase after the Government Gazette’s public comment period without clear explanation and proper consultation could undermine financial inclusion and competition. The grace period resulting from the act’s withdrawal is an important opportunity for fintechs, banks, and other stakeholders to advocate for fair, constructive change.
A threat to digital inclusion
“We support the intention to strengthen regulatory measures that facilitate South Africa’s exit from the Financial Action Task Force (FATF) greylist. However, the drastic increase in verification costs threatens to unravel our progress toward accessible, secure digital finance,” says Bradley Elliott, CEO at RelyComply.
“It’s not just about business margins. It could impact millions of South Africans’ access to essential financial services. The disconnection between the markup and operational costs of running eKYC processes completely challenges the business case of a cost-effective Faster Payment Network Strategy.”
Andre Hugo, CEO and Co-Founder at Spot Money, adds, “We’ve been part of the working groups that were consulted on the Faster Payment Network, which we believe will be a key element in driving financial inclusion. If participants of the Faster Payment Network cannot run KYC checks at a reasonable cost, it will impact their operating margins and return on investment.”
Elliott points out that financial institutions face high compliance costs and have no credible alternatives to the DHA’s Home Affairs API for automated ID verification and facial matching capabilities when performing KYC or eKYC checks.
The increase in the cost of DHA ID API calls may lead to higher KYC compliance costs for fintechs, banks, and payment service providers (PSPs). This could slow innovation within the fintech sector and reduce consumer choice and competition. There is also a risk that local fintechs may face increased pressure from more affordable global eKYC solutions.