Digital Finance Is The Future Of Africa

At the beginning of this year, the African Continental Free Trade Area (AfCFTA) came into effect with the main goal of eliminating the obstacles that hinder trade and business between member countries. Small, but agile firms like Xente Uganda came in, ready to jump in as enablers. Xente, a fintech company; is one of an increasing number dotted all over Africa taking advantage of advances in digital technology.

“Digital payments are seen as a vital component of cross-border commerce in the years to come where the merchant and customer agree to accept a virtual payment for the purchases of goods or services”, says Allan Rwakatungu, the CEO and founder of Xente, a digital account designed to save time and money on everyday business payments.

Fintech is going to play a significant role in making AfCFTA work for the simple reason that digital transactions are more seamless and free up precious time. This, in turn, means more trade and business opportunities. Right around the time AfCFTA as an idea was being debated, people like Rwakatungu were already thinking practically along the same lines.

“I realised that in order for us to be more competitive, our businesses needed to join the digital economy in order to level the playing field, making it equal to what our counterparts have in the west. If we remain in our small little dukas (small shops) accepting cash, there is no way we are going to be competitive on the global scale”, he said.

To test the waters, in 2012, he started a digital sports entertainment platform before launching Xente four years later. Essentially, Xente is a payment, financial services and e-commerce app for consumers and businesses. It allows businesses to automate payments. “I am not going to say it’s like a bank account. It’s a digital account. We offer corporate accounts and digital payment solutions for businesses.”

Although currently only operating in Uganda, Rwakatungu says they have plans to expand to other markets, “We have a vision at Xente, I believe so much in this vision to bring all African businesses into the global digital economy. Every day when we wake up, we take small steps towards that vision, but there is still a lot of work to do.”

He concedes that it may sound like a cliché, but Xente’s future growth depends on their customers and the reliability of their services. “Our major asset is the customers. What their major problems are right down to the solutions we can offer them. I always focus the team on that. Our mission at Xente is to deliver happiness to our customers. We wake up every day to deliver value to them, correctly and with integrity to ensure their data is safe, make sure their money is safe and that the transactions are fast. By doing so, this helps to safeguard our platform and ultimately our business,” he said.

A critical factor that affects the business is regulation. Last year, the National Payments Systems Act 2020 became law and introduced several challenges for local fintech. They now fall directly under the oversight the of Bank of Uganda, the financial regulator.

Rwakatungu has thought on this. “Regulation is the trickiest thing to scale. We have a risk management strategy in place and this is one of the reasons why we welcome regulation. It might be difficult, but we welcome it because it provides us with a framework under which to operate. Regulation also helps safeguard the customers’ interests, their data and information and their money.”

He adds, “However, the most immediate impact of the National Payment Systems Act 2020 is that it has slowed down product launch. Now you have to do a lot of compliance stuff. You don’t just come up with a product then send it off to the market. Now you have to satisfy the Central Bank. Compliance is a lot of paperwork that needs to be done and most of it is manual. The manual requirements needed to comply also mean that you have to put capital aside that you cannot touch.”

He, like a lot of fintech founders agree that to a certain extent, the new regulatory environment may inhibit fintech development in Uganda. But, “They have left the sandbox out there. So if you want to try out something very quickly in the market, the sandbox is open for that.” In brief, the sandbox provision allows fintech to test new applications live but without endangering the overall system in place.

Through the Financial Technologies Service Providers Association (FITSPA), Uganda, founded in 2017, Rwakatungu and his peers express their views and concerns with regard to the drafting of the new national payments law. Perhaps not all their contributions met acceptance. Even so, he quips, “FITSPA allows us to come together as an industry and advance our common objectives. We work together including the regulator, partners and corporates to develop our financial system as whole,’ he said.

Rwakatungu is not afraid to dream big. “Digital is Africa’s opportunity to leapfrog into the future. Just like we leapfrogged from no phones to mobile phones, we can utilise digital from almost no finance to the most modern finance infrastructure platforms and products the world has ever seen. We should take this opportunity and run with it.”