Emerging Markets of LATAM & Africa

Episode 317

State of Identity Podcast

3/9/2023

Episode 317

Emerging Markets of LATAM & Africa

On this State of Identity podcast, host Cameron D’Ambrosi is joined by Chaitanya Sarda and Rushabh Shah, Founders at AiPrise. They take on the conversation of fraud prevention in the emerging markets of LATAM and Africa and how KYC and AML are in the emerging markets. 

Host:

Cameron D'Ambrosi, Senior Principal at Liminal

Guest:

Chaitanya Sarda, Founder at AiPrise

Rushabh Shah, Founder at AiPrise

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Cameron D’Ambrosi [00:00:04] Welcome everyone to State of Identity. I’m your host, Cameron Ambrosi. Joining me this week are Chaitanya Sarda and Rushabh Shah, co-founders of AiPrise. Gentlemen, welcome to State of Identity.

 

Rushabh Shah [00:00:15] Thank you, Cameron. It’s really nice to see you.

 

Chaitanya Sarda [00:00:18] Thank you for having us.

 

Cameron D’Ambrosi [00:00:19] Well, really excited to have you here, you know? You know, we connected. Gosh, you know, last year at some point when you guys were correct me if I’m wrong, coming out of Y Combinator. And, you know, I was really intrigued as to what you’re building and and the approach you’re taking to this, you know, identity verification market. So I guess before we go a little bit deeper, you know, hit our audience with your elevator pitch. What is a prize? What’s that problem you’re looking to solve in? And what was that market opportunity that you saw needed addressing in the identity space?

 

Rushabh Shah [00:00:55] Doug, I can maybe take a stab at this. So you’re president, Global KYC Orchestration platform. So what we want to really aim at is if you are a fintech company looking to expand to multiple countries and running into issues with compliance, onboarding individuals or businesses and having fraud issues like we are the people to come to and we can help you connect with the right local vendors and need to agree fee to resolve those issues.

 

Cameron D’Ambrosi [00:01:27] That’s fantastic. And, you know, what was the the impetus for, I guess, discovering, you know, the market opportunity in this space? I find it always interesting to kind of understand the various on ramps, if you will, that people had to digital identity, like what are your respective backgrounds and what what was your experience, if any, that kind of made this opportunity pop onto your radar?

 

Chaitanya Sarda [00:01:51] Maybe I can take a stab at the opportunity itself. So like you think of identity verification, and here in the US we feel it is more or less sort of they’re like giant companies solving this in the completely vertical stack, ordering organization of different vendors and creating a solution. But the problem exists in the emerging market. Think of Latin America, think of Africa, think of Southeast Asia. Make these markets traditionally underserved and the companies in the EU and and US are now trying to target these new geographies. And we want to become that solution that they come to for compliance and the needs. But it’s very hard to know each local vendor of Chile, India, Nigeria and Kenya, we have done the research. We know what works, we know what doesn’t work. That’s how de Fond du Lac we feel. Apres is better suited for companies who are trying to expand to new geographies.

 

Cameron D’Ambrosi [00:02:52] You know, when you say orchestration, you know, I had orchestration as maybe my top buzzword of 2022. A lot of folks using it in many different ways. I think some apt, maybe some less apt. You know, when someone says what is orchestration mean to you? How do you frame the approach you took in terms of building out that orchestration layer for a high priced.

 

Rushabh Shah [00:03:16] And so for us, one, when we saw orchestration, you know, like I said, I mentioned as you’re going into new geographies, new countries, each country has such a unique flavor of doing their own KYC and that you cannot just have like one template solution and you’re done. You know, what we realized is you want to do so many things, like in some countries you want to prefer non documentary text, like, can I just use a number and a selfie and we’re done. But then there’s also the problem statement just gets more and more convoluted as you start running into fraud. So it’s like, Oh, but the transaction amount is higher than X. Now the government requires you to not only collect just a number, but also a physical I.D. and, you know, like, things keep changing. So I think that’s where we felt that what people really need is a role engine, is a place where you can just drag and drop different providers and play around with them, have the perfect, you know, like workflow that you’ll, if I may, that you need for that geography.

 

Chaitanya Sarda [00:04:23] Yeah. And to add to that orchestration also helps. Even within one geography. You want to do KYC, you want to do email, and you want to do social media lookups. And like there are some traditional companies which are globally renowned for social media lookups, globally renowned for behavioral tracking. You want to use them, but you don’t want to have a contract drawn up with them. That is where we feel that the orchestration really comes handy. So you get the best of both. You get the one contract with Apres and get all the vendors listed on the platform, plus the workflow and the ability to maybe ditch that one particular vendor tomorrow and go with the competition on the same the platform.

 

Cameron D’Ambrosi [00:05:09] That, you know, I think you guys are hitting at the heart of the reason why we’ve seen such a rise in orchestration and that is quite frankly, you know, buyers don’t have the resources to oftentimes go out and build, you know, a best in breed stack themselves. You know, they’re constrained in terms of their overall budget. They’re certainly constrained in terms of engineering resources. And, you know, if you as a platform can offer as many kind of superior point solutions for the markets that they’re looking to target, and that really provides a significant value add adding certainly when you think about, you know, companies that are looking to execute like a land and expand strategy within, you know, a region like LatAm or like Southeast Asia, this offers them the flexibility of bringing on a single solution. And then as they continue to expand markets, rather than having to go out, launch a new RFP process, figure out, okay, you know, I need to be able to do document verification or social media, look up an X new market, who’s the best? Let’s get the contract signed up now. Let’s take several weeks to integrate. Then we have to have testing, yadda, yadda, yadda. You know, I presume all of this is managed through like a single, you know, web interface and dashboard that lets them have kind of cross enterprise view into not just the state of, you know, how they’re seeing these identities, but also from like just a billing and management infrastructure where the employees on their end are coming into the platform. It’s all in one place for them.

 

Rushabh Shah [00:06:47] Yup, exactly. And in many cases, like you go through the entire exercise of integrating just to realize it doesn’t even work. So he and like so we wanna look at that time chart and just get you what you need right away.

 

Chaitanya Sarda [00:07:01] And let to give you some concrete examples. We had some vendors in Kenya and like the UN, voted them on the platform to gave it to a customer and we were winning 50% acceptance rate and we were like, okay, you, you quickly need a new vendor. Imagine you were the company trying to figure it out. Until you have access to production data and you ran it to maybe a thousand techs yourself, you don’t know what works. We have the knowledge of what works in each geography today, and we we want to leverage that knowledge to help companies scale really, really fast.

 

Cameron D’Ambrosi [00:07:39] So you know who. From a buyer perspective, like where have you found, you know, your strongest product market fit thus far? Off the top of my head, I would presume, you know, earlier stage, faster moving platforms, you know, fintechs, cryptocurrency exchanges, for example, would kind of be right in the crosshairs of of who would find immediate value from your platform. You know, where have you seen that early success.

 

Chaitanya Sarda [00:08:09] So in terms of early success, Spike Lee mentioned cryptocurrency companies because by default they are global. The second Avenue is cross-border payment companies because they need to do the AML checks and KYC of individuals across the board. And now what we are trying to do is go to the local markets of Latin America in Africa and onward customers from that. Because even in Africa there are multiple countries that companies are operating in. So Nigeria, Ghana and South Africa are like usually the most famous countries in Africa, in Latin America, Mexico, Brazil, Colombia, Chile. And one one other thing that we wanted to add to this is even though the the vendors say that they work in all of these geographies, they do not like, we have proved that the pass through rates of of vendors to Colombia is actually higher in Colombia than other geographies.

 

Cameron D’Ambrosi [00:09:10] That’s really, really fascinating. And in general, I guess pulling back and we’d love to hear your thoughts on some of these, you know, market specific trends, anything that has leapt out at you since you’ve gone live across a number of these markets about, you know, whether it’s market specific or regional nuances, you know, in this onboarding space or are the challenges that your platforms are facing in that, you know, consumers face in getting onboarded largely similar when it comes to some of those pain points.

 

Rushabh Shah [00:09:42] I think it’s very different and I think that is one of the main challenges that, you know, we want to help streamline. And we are also in the learning curve. Honestly. We run into new geographies and new restrictions every day. You know, like you might be aware of, like how Egypt has the strongest, strictest regulations and you like it’s very hard to penetrate into that market. This is and just even the state of identity itself in each country, you know, like Nigeria is like way ahead. It has a centralized system which also is linked to the biometrics versus if you go to some other country, then you may not have a lot of good existing existing. In fact, U.S. is one of the countries which has probably the least, you know, infrastructure, centralized infrastructure, rather. So that just makes it increasingly difficult. And also how flexible or like how. You know how open people are to submit. Sensitive data is also different in different localities. You know, like sometimes like giving a local I.D. number, it’s just the norm. But I know that in the Indian market, if you ask for a passport, my passport is somewhere in the locker in a bank, you know, like that. That’s how safe we keep it. And then so if you asked us for our passport, I’m going to think like, ten times before opening an account with you.

 

Cameron D’Ambrosi [00:11:08] So from that perspective, I think one of the most interesting developments that you called out, right, is the continued rollout of, you know, what you call kind of centralized identity infrastructure in markets, whether it’s you or whether it’s sub-Saharan Africa or many other places globally. You know, what impact do you see that having on the identity verification space and on price? You know, do you plan on on trying to be kind of a similar conduit, that one stop shop to connect to these myriad centralized schemes to again, ease that integration burden for your clients or I guess more narrowly speaking, you know, what kind of threat do you think, you know, ID programs, mobile driver’s licenses, centralized ID programs have to platforms like yours.

 

Chaitanya Sarda [00:11:56] They actually had an advantage. So the traditional KYC vendors, they are not going to go away, at least for the next 3 to 4 years, because not everybody in the U.S. is going to have an MDL. Similarly, around the world, governments are trying hard, but the transition will take a lot of time. And we also saw that once even you are transition to a completely centralized digital identity like in India, that is Orkut, which is completely central and digitalized. That is fraud on top of it. That is missing data on top of it. You need orchestration to completely get the full picture of an individual. You need to look checks. You need to look at sanctions and others. So I still feel that actually APAC is much more suited to the in the new world than the old world, that you would just have a simple verification flow of collecting driver’s license and passport, which a lot of vendors honestly were doing at some point of time and even are doing today. And they just claim that they have covered in one in 20 countries. But honestly, nobody wants to use a passport or IBM in India, in Nigeria, in Peru. They want to use a local identity. And we are the first global platform was forcing these giant companies to okay, there’s an alternate reality of KYC. Take a look at it if and you will see a higher conversion rate through that funnel. And that’s the that’s what we are forcing them to do.

 

Cameron D’Ambrosi [00:13:33] I love that. And I think, you know, we see that broadly across the space, which is, you know, again, it’s a bit myopic to think that just because you have, you know, a government identity scheme, for lack of a better word, that that means you still don’t need a bunch of corresponding identity infrastructure on the relying party side to your point, like, you know, perhaps sanctions screening are still going to exist in each one of these markets is obviously dancing to the beat of their own drummer, so to speak. Right. You know, you’re going to have different sets of standards, different technologies, and, you know, relying parties are not going to want to necessarily take the time to, you know, integrate with all those folks. And we’re fond of saying, you know, digital identity is a how, not a what? Right. Folks are interested in using digital identity to do things. And typically we say that from a consumer perspective, right, that consumers are not interested in identity for identity sake. They want to transact. But I think that’s applicable from the enterprise side as well, right? Like if you are a company, let’s say you’re, you know, a money transmitter, as you alluded to earlier. Identity is not your fault, right? You are not a digital identity company. You’re a money transmission company. You want to be good at sending money around the globe, enabling a frictionless user experience for your customers. Obviously, complying with the various rules and regulations that you need to comply with. Identity is probably not your core strength. And if you can offload that to an independent third party, I think there’s a tremendous amount of value that can be added to let these companies focus on what they do best, whether that’s fintech or whether that’s online to offline platforms are sharing economy or e-commerce or whatever the case may be.

 

Chaitanya Sarda [00:15:31] I completely agree with that. Yeah.

 

Rushabh Shah [00:15:37] Think, in fact, at the end it has a great case study that had to make that indignant, too, which was like Binance right now has really amazing onboarding experience that you pick any country and it has like the best possible the best recommendation on which it that you can use to onboard. And I’m sure it took months or rather years for them to build that playbook out. And you know, what we want to offer is just like on day one itself, you get a Binance like onboarding solution without having to worry about, you know, compliance in each region. And at the same time that you can focus on your corporate, which could be like crypto, it could be remittance, could be whatever it is.

 

Chaitanya Sarda [00:16:18] One funny thing, which I used to tell Drew Chavez, why is Binance’s and every single identity providers customers list and like you go to like the ones in the EU, the ones in India, the ones in U.S. everybody’s custom. One is Binance. And then I got a chance to look at their KYC floor while I was in India and I was blown away. I’m like, Wow, this is an ideal flow that anybody and everybody in the market, should they they have the the be the index, the the local identity checks in Nigeria and India in any geography you take. And that’s it. I think it’s the golden standard.

 

Cameron D’Ambrosi [00:16:57] I couldn’t agree more. So let’s shift a little bit to the future. You know, IDs aside, I would love to hear your thoughts on, you know, where you expect new and exciting developments in the identity space to occur. And and in general, you know, where do you see these trade winds blowing in in 2023 for HIPAA, excuse me for a reprise and for the identity market more broadly?

 

Rushabh Shah [00:17:22] Maybe I can I can share some thoughts. And then Jordan and I keep going. One thing which comes to my mind definitely is, you know, like with the recent turn of events, there’s going to be a lot more regulatory insight or oversight into a lot of like crypto companies and even bass providers, which we are already seeing. I think that will serve as great tailwinds for price for sure. You know, as companies need to get their message together and just to keep things ready for when the regulators are going to come. And so that that’s that’s top of my mind for sure.

 

Chaitanya Sarda [00:18:03] Yeah. And for me I think costs. I, I believe that that of vendor like a price will talk to customers they don’t even know what they know they have they’re like oh yeah we got this one. We’re paying thousand dollars a month, but we just use for 30, $40 a month. And right now, because we don’t have that much staffing, so like that cost cutting effort would lead to them exploring something like a high price, having that one contract. And then whenever they want to get rid of a company’s contract, they could do it. That’s another one. And the third thing is expansion. I think the U.S. market is very crowded. The neobanks, the the crypto companies, there’s only so much population that you could take up. The next stop for them is Latin America. And I think apres is the right choice for the compliance platform. Then, then and if they expand.

 

Cameron D’Ambrosi [00:19:04] So what’s next for for enterprise and for folks who are listening, who want to get in touch, who want to learn more about the platform and how they might partner with you, where should they go?

 

Chaitanya Sarda [00:19:19] Yeah. I mean obviously I plays dot com, it’s like the one stop shop on their website for everything and they can definitely reach out to us at info at a price. Dot com. And in terms of where we are going next I think the we want to be on that one page that we have the largest set of providers from emerging markets of any company. Today we have around 25 providers on our platform. We are doubling down on that. We will have at least 60 to 70 by the end of the year. And then the next step after that is run through multiple of these providers and get which lots there. And that is a repository of knowledge that we will then share with the customers. And I think that is going to be the venue for our press.

 

Cameron D’Ambrosi [00:20:10] Amazing. Well, thank you so much for your time. I greatly, greatly appreciate it. Really looking forward to staying in touch. You know, I think what you built is is very of the moment. And there remains a tremendous opportunity in the space and looking forward to checking back in with you to see how you fare in the year ahead.

 

Chaitanya Sarda [00:20:29] Thanks a lot, Cameron. It was nice chatting with you as well.

 

Episode 324

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