Xente Tech Limited: A Mobile Financial Services and E-Commerce Platform in Uganda

Interview with Allan Rwakatungu, CEO and Founder of Xente Tech Limited

What is your assessment of the sector? What are the latest trends? Is the sector competitive?

The sector can be divided into two parts: e-payments and e-commerce. The e-payments sector has had an incredible boom since 2008, especially with mobile money which is estimated at almost 20 million accounts. We have seen a huge transformation. Mobile money started in 2008 and has become the largest transactional platform in Uganda. There is also M-PESA in Kenya and Tanzania. E-commerce is lagging a bit behind. A lot of what is driving e-payments is peer to peer transactions. That movement from peer to peer to commerce is what is coming next for the industry.

When will this movement to e-commerce happen?

This movement is happening right now. There have been a number of companies trying to tackle the e-commerce problem such as OLX and Jumia. Fraud and lack of trust have caused that movement to stall. Maturity of the e-payments sector can be used to spark that transformation to e-commerce. Everybody is interested. We expect to see marketplaces on the mobile money platforms soon as well as with banks. In the next four to five years we will begin to see a critical mass.

What do you do as a company? Where do you stand out?

Our biggest thing now is that we need investors. Partnerships are the new disruption, especially for companies like ours. We can leverage bigger players to grow. Some interesting partnerships we have leveraged are with banks and telecos.

My company is called Xente Tech Limited. We are a mobile financial services and e-commerce platform. We are layering this mobile financial services infrastructure that we have built and putting an e-commerce marketplace on top of that for some very interesting use cases. For example, a customer can come onto our platform and buy a phone and pay for it in installments over six months. In a market where credit cards do not exist, that will be what starts getting people interested in e-commerce. Now, they cannot go to a supermarket and say they do not have enough money but will pay over six months or go to a bank and ask for $300 to buy a phone. That marriage will be the spark that will create the real need, demand, and growth. That is what we are contributing to the sector.

How do you define this?

We offer a credit financial product. It is just the beginning. I give you credit to pay for your phone over six months, but I call it an installment instead of a loan. It will get even more interesting. For example, insurance penetration in Uganda is less than 1%. Insurance in this country will not be sold traditionally. But if someone wants a TV and you add an extra $20 or $30 to guarantee that if that TV gets stolen then we will give them a new one, we have then sold them an insurance product. We are trying to create unique use cases leveraging already successful mobile financial services with e-commerce and then spark growth in the commerce space.

Who are your clients?

Someone once said that partnership is the new disruption. It is the ability to be able to partner with different players and combine them to create a unique product. For example, Uber never created something new. It created an app and matched those people with cars with the people that needed rides. That is core to our business model. If we create an e-commerce marketplace, we can bring buyers and sellers together. Then, we partner with licensed financial institutions. We are in the process of partnering with banks, insurance companies, mobile money operators, etc. When you bring them together into a marketplace you can create a very unique product and very unique use cases.

How can you accelerate the growth process? What is the next step?

What is exciting about this moment in time in the world is that our partners – the banks, insurance companies, microfinances, licensed financial institutions – realize that they need to innovate in order to be relevant in the long term. So, they are very receptive to ideas like ours. It does not end there, though. We are creating a unique product, so we need investment. We have proven over the last few years that we are able to execute, build a product, and attract customers. We have over 50,000 unique users on the buy side in our marketplace. About 10% are active month to month. We have onboarded over 200 sellers. We have partnered with Absa, which is one of the largest banks in Africa, to process payments. We have partnered with a licensed lender to give credit. We have proven that the base infrastructure is there and it is working. We have people using the platform every day. Now, we are looking at Series A investment to scale this up much faster.

How do you differentiate yourself from the other players who have already done this?

Like the other players in our space, we are all babies trying to figure this out. There is no clear market leader. Even Jumia, who has IPOed for more than $1 billion, still has less than 1% of their commerce in Uganda and Africa. There is a lot of head room to grow into. When I see competition today, I do not see competition with Jumia or OLX or mobile money or marketing, I see competition with the status quo. My wife is still going to get up, jump in the car, go to the store, and buy a phone. That is where the competition is and we are all still fighting. There will be room for ten to twenty companies as the market gets bigger. There will be one to three giant market leaders, but it does not mean that if you are at six or seven you will be a dead business. You are a potential acquisition target for the bigger players. We are already seeing some very interesting niche players. For example, there are players who will help customers buy products from Amazon or eBay or Alibaba and bring it into the country instead of selling from local sellers and they are doing fine.

Are you looking for investors or partnerships?

Our biggest thing now is that we need investors. Partnerships are the new disruption, especially for companies like ours. We can leverage bigger players to grow. Some interesting partnerships we have leveraged are with banks and telecos. VISA and Mastercard are also showing particular interest in this market. They are excellent partners to catalyze the market. We are also seeing big technology companies such as Google, Facebook, Microsoft. They have been very helpful in our growth. Over the years, we have received free and subsidized Cloud services that have helped us to get off the ground. Those partnerships are very important. We sit now at a technology hub. Partnerships are how you scale in this market. It is not possible to go at it alone.

What do you want to achieve in two to three years’ time, the medium term? What is your vision?

We want to build a business that scales. From the foundation, we have set up the business to scale. Last year, we were often asked if this works in Uganda, what about other countries? So, we spread the technology to Nigeria, Kenya, Tanzania. We do have a few transactions from those markets to prove that the take can scale. In the next year, we will prove that the market can scale in Uganda, then go out aggressively and look for a Series A investment. We will then scale up Nigeria, Kenya, Tanzania in the next one to two years to scale technologies and scale the market. Once we have done that, we will have proven that we have a company that is going to be one of the market leaders on the continent. We will then see what happens from there. Maybe it will be time for me to step aside and bring on a more professional manager.

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