From Pandemic Pivot to Fintech Powerhouse: The Xente Journey with Allan Rwakatungu

Can you give us a brief overview of the post-Covid status of Xente?

This has been a time when we came into our own, because before Covid, it was very hard for companies to understand our value proposition. But once people were at home and they needed to work – and get paid easily, safely, and within policy – our pitch became much easier to understand. Pre-Covid, we were focused on consumer payments and e-commerce, but during Covid, we jumped on the opportunity to wholly focus on businesses. Since Covid, we have actually grown quite a bit. We have attracted great clients, the likes of our social security fund, MultiChoice, M-Kopa, some large insurance companies, who are all using us for their day-to-day B2B payments and finance operations.

What developments have informed your strategy and market trends in Uganda when it comes to B2B payments?

A few interesting things have happened over the last few years, with the most notable one being regulation. Post-Covid, the National Payment Systems Act came into play. There are over 30 fintech companies that are licensed in Uganda, but it is early days and we are all trying to figure out how to operate in a regulated environment.

Secondly, there was increased market awareness of digital transactions. Post-Covid, the entire market became aware of the fact that you can transact from home and from anywhere in the world. You can do business, but you do not have to be in a physical location.

To finish, there was a larger willingness for companies to partner with each other, booth corporates and start-ups. During this time, we did a big Visa partnership, so that was huge for us. But again, partnering with telecoms, banks, and other fintechs to create a really world-class product has become easier over the last few years.

Could you elaborate more on the unique products you developed during this period?

During the Covid period, businesses needed to continue operating, and the people who were having the biggest issue were the finance department. As a finance department, you need to pay your teams, your suppliers and other beneficiaries, and you cannot do it ad hoc.

There needs to be policies around who initiates and approves financial transactions. There also needs to be paperwork and workflows, and the data needs to flow back into your ERP. What we have done over the years is build a product that targets businesses, but also specifically targets finance departments, to make their B2B payments easier. Our product also makes sure that their payments are in compliance with policy-based practice for finance operations, and that their reporting is easy. This can be from anywhere, without being in a physical location. Wherever you are in the world, whatever time of day, you are able to do it.

Could you tell us about product developments in the pipeline?

Over the last few years, we have been hyper-domestic, so all our clients and payments are in Uganda. We are in the process of developing our cross-border payment solutions, so that we are able to serve clients across different markets. For instance, for a client with teams in multiple African countries, they will be able to make efficient payments. We would also like to serve more multinational clients, clients who are in the UK, US and Asia, but with operations in Africa and a need for easy payment solutions.

What investment strategy are you pursuing?

We have seen a slowdown in investing, but fintech still remains hot. Despite being affected by this slowdown, we have had to look at the way we grow this business, in order to make sure that we are doing it economically. That the unit economics work even at small scale, and that we do not have high burn rates resulting from inefficient teams and products. We hope to find strategic investors as we get bigger and more attractive.

What is your medium-term vision for Xente? What do you hope to achieve within the next three years?

I am very excited about the fact that, finally, it is going to be possible to have a Pan-African play without requiring a lot of capital and resources. Why do I say that? The infrastructure is being laid by partners and companies in this space, the regulation is becoming a lot clearer, and the market is more aware. At last, the opportunity to really have a good company that can cover several markets is going to be possible without requiring a lot of money. I am excited about that and would like to be one of the players that make it happen.

What would you say is the direction the Ugandan fintech sector is headed? And what are some of its challenges?

I will answer the question in three parts. To begin with, the market. Everybody always talks about Africa as if it is one market. It has never been one market. It is several markets. However, I think fintech, our business, and people in our space are the ones who are going to facilitate this cohesion. As a result, you have one platform and you can transact from Kenya, Uganda, Tanzania, Zambia, and Mozambique through one platform that is safe, trusted, and compliant. And platforms like ours will reap that advantage.

Another trend that we are really excited about is in product and technology. The emergence of things like stablecoins, what you would call regulated crypto, will allow easy and seamless cross-border payments. You also have things like AI that I think are really, really exciting, that will accelerate the rate of product development and make user experiences so much. Even for what you would say are low-developed markets, semi-literate populations, I think AI is going to enhance product experiences.

Naturally, since we operate in an environment where we are regulated, there has to be compliance. I see our regulators coming together in a joint effort to really enable companies like ours to operate in a larger market. In summary, it is not just Uganda three, four years down the road. I think the promise of an African market is coming to fruition.

What is your view on the competition landscape in Uganda?

People always ask me about competition. One of the players in the space always says, “We are 1% done.” It is really early days, like the internet in 2000, and you would not be worried about who you are competing with. The focus is on, how do I create a bigger pie? There is so much to do, so much to build, and it is not a zero-sum game. There is so much to get done ahead of us that I am not too worried about competition. I am actually worried about, how do we have the stamina, the sustainability to grow our companies and provide value in the market?

What opportunities exist in the current market?

There is poor market adoption in Uganda. You could look at East Africa as a block, but Uganda is still very siloed. Africa has many problems, especially around our politics and underdevelopment, things that sometimes pull us behind. And our governments have a big role in making sure that this potential becomes real. We do not want to be here three, four, five years down the road still talking about potential. This technology thing is real. Fintech is real, and it has the ability to create something special. The beauty about building in this market is you are starting from a clean slate. There is no legacy. For example, for many businesses, you will find that you are their first bank account, so our policymakers have a very big role in making sure that we make this thing real.

What are your thoughts on the adoption rate in Uganda?

I have been in this space a long time, and I have seen how quickly things change. I worked in telco during the mobile phones era, so I saw phones come from nothing to everybody having a phone. I saw what happened with mobile money, from nothing to everybody using mobile payments. Today, many businesses actually do not have business accounts. Many businesses are still doing domestic payments, but I think we are going to see an acceleration of people getting business accounts, doing cross-border payments, and trading with each other. And in Africa, it sparks, so it is an interesting space to be in. Difficult and crazy, but very interesting and exciting. There is much opportunity, and if it does not happen, we are at fault.