There has been a drastic increase in the cost of real-time identity verification for banks, fintechs and mobile communications companies in South Africa, resulting in a rethink as to how they perform know-your-customer (KYC) checks.
According to industry executives, this is accelerating interest in reusable, layered digital identity systems.
In July last year, the home affairs department controversially increased the price of live ID lookups against the national population database from as little as15c to as much as R10/transaction, significantly increasing compliance costs for financial institutions.
Home affairs minister Leon Schreiber and his department came under fire from stakeholders in the telecoms, banking and microfinance industries for his decision to hike access fees for the real-time verifications, which are needed to fight fraud.
An after-hours option batch processing of requests is also now offered – at a more affordable but still more expensive rate of R1/query. The move prompted companies to search for alternatives that reduce reliance on repeated calls to the database.
Analysts say the issue is not only cost, but the way identity verification has historically been implemented.
Tom Schoon, head of strategic partnerships for Africa at global verification platform Sumsub, said access to the home affairs database was previously loosely controlled. This allowed a wide range of organisations, including unregulated entities, to connect via application programming interfaces.
Multi-layered KYC
“The combination of sharply higher costs, weak historical controls and uneven data quality has pushed some players towards risky workarounds like using cached copies of the database. Financial institutions expect robust, current verification with predictable and sustainable cost structures,” he said.
Schoon said rather than treating the department’s lookups as a default step for every transaction, industry players are increasingly advocating for multi-layered KYC architectures that use the national ID system as a legal anchor for establishing a person’s core identity, while shifting most day-to-day risk decisions to additional data sources.
Under a reusable KYC model, a customer’s identity can be verified once through a strong check against the department’s database and remains valid for a defined period, typically several months. That verification can then be reused across products and channels, reducing the need for repeated lookups.
Read: Biometrics boss slams home affairs over R10 ID query fee
During onboarding, a bank will do one strong check against national ID rails, then bind that identity to biometrics such as liveness detection and face matching to prevent impersonation. Step two will involve device risk intelligence such as fingerprinting, Sim swap detection and geolocation anomalies.
The final layer will rely on data analytics such as behavioural scoring, velocity checks, and consortium intelligence. The state database remains the anchor, but it’s no longer queried for every event.
Periodic calls back to the department would still occur, but they would be triggered by time-based expiry or elevated risk, rather than routine transactions.
He said banks adopting this approach will reduce their exposure to escalating government costs, while consolidating KYC, anti-money laundering, sanctions screening and fraud detection into fewer systems.
The model also supports scale, particularly for institutions operating across multiple channels or jurisdictions. Once an identity has been anchored and enriched, it can be reused without rebuilding verification workflows for each new product or market.
This is increasingly important as banks expand digital services and cross-border offerings across Africa, where identity infrastructure varies widely between countries.
At a regional level, interoperable identity verification could lower friction in cross-border payments and trade, where weak trust mechanisms currently drive up costs through multiple intermediaries.
Sergio Barbosa, CEO of banking platform FutureBank, said many institutions still operate fragmented stacks, with separate vendors handling identity verification, anti-money laundering, sanctions screening and fraud detection.
“This fragmentation makes it difficult to implement a consistent reusable KYC strategy. Platform-based approaches aim to solve this by providing a single orchestration layer that integrates national ID checks with multi-source risk analytics,” he said.
Read: Home affairs faces backlash over ID database fee surge
If South Africa’s shift towards reusable KYC and layered identity verification proves effective, they believe the model could be replicated across other African markets, which will lay the groundwork for the continent’s next phase of digital financial infrastructure. – © 2026 NewsCentral Media
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