BIG5D Podcast Episode 25: Ukheshe Co-Founder & CFO Mike Smits

The BIG5D Podcast

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BIG5D Podcast Episode 25: Ukheshe Co-Founder & CFO Mike Smits

"More and more, every business wants to have a fintech division."

Charles Laughlin

Oct 25, 2021

Episode 25 of the BIG5D Podcast features a conversation with Mike Smits, who is co-founder and CFO of Ukheshe, a South African fintech that operates largely in the background of Africa’s financial services ecosystem.

Ukheshe was founded in 2018 as a B2C digital banking application with a mission to promote small business financial inclusions in Africa.

But the Johannesburg-based company quickly realized that becoming a platform for other companies to build fintech products was a better path to scale than building a consumer-facing product. The latter would require raising a lot of money and pouring it into customer acquisition.

So in 2019, the company sold its payments product to Telkom (which is now the WhatsApp-based Telkom Pay) and became a platform that now powers fintech solutions from most of South Africa’s banks and telecoms. And its serves as the back end for many fintechs as well. ChipperCash’s recent market entry into South Africa was powered by Ukheshe for example.

Ukheshe also has important commercial relationships with Mastercard and Visa.

In April 2020, Ukheshe joined Mastercard’s Start Path program, “an exclusive startup engagement program for later-stage scaling startups.” The company has since helped Mastercard launch several fintech products into the market. One example is a prepaid payments program with Mastercard and Nedbank.

The decision to pivot to a cloud and API-based platform play has served Ukheshe well. The company hasn’t had to raise any money since raising a US$500,000 seed round in 2019. Until now, that is.

“The business is still majority controlled via the founders, which is great,” Smits said on the podcast. “We are actually on a fundraising drive at the moment. The fundraising drive is to fund expansion into multiple markets. We've got aspirations to be in 40 markets in the next in the next two to three years. And that comes at a cost.”

Had Ukheshe stuck to its original model, its founders would likely be significantly diluted at this stage.

Smits said Ukheshe’s focus is on expanding into emerging markets across the globe — not just in Africa-Middle East. He said the company is already in talk with partners in Southeast Asia. And it has designs on Latin America as well.

Ukheshe ultimate goal is to be the technology platform that companies in emerging markets worldwide use to launch fintech products.

“We want to commoditize fintech so that it makes easy for people to be able to launch fintech propositions, because it's good for the end user,” Smits said.

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Here are some key passages from our Episode 25 interview with Ukheshe’s Mike Smits.

Ukheshe began as a B2C digital bank. Why did you make the pivot into a white-label fintech platform?

“For us it was better to be able to offer it as a service to allow other people to launch digital offerings than for us to raise the funding and digitally onboard people, etc. So in about 2019, we pivoted the business. We sold off our B2C operation [to Telkom].
“We now see ourselves as fintech enablement platform. Fintech-as-a-service, if you like, where, if you want to be able to launch a proposition, we can either help you with a white label solution, or you can build it on top of our APIs.”

Ukheshe encourages companies to “transform your business into a fintech.” Is there any limit to the kind of business can do this?

“Everybody traditionally thinks of the fintechs as being the telcos and the banks. But you you can now go into the FMCG [fast-moving consumer goods] companies, whether you’re Coca Cola or AB InBev, that now needs to do last-mile delivery. And the last-mile delivery traditionally has been based all on cash. So with COVID, and the risks associated with cash, all of them are trying to be able to convert and launch a fintech proposition to take cash out the equation.
“We've got a contract that we've signed with with DHL, for example. Due to last mile delivery, there could be payments that are necessary before the goods can be handed over. Traditionally, they would have to accept cash. There's the cost of cash and everything else that goes with it. If you can convert that very easily across to a digital mechanism, it’s in everybody's interest to be able to do that.
“More and more, every business wants to have a fintech division to be able to assist with receiving money.”

You also work with disruptive fintech brands. How many of these companies are launching on platforms like Ukheshe?

“I think it's it's becoming more and more that way, especially with open banking type of drives across the world. So people always ask us, ‘What is your competition?’ Our competition is build it yourself.
“But for somebody to actually go in and build it themselves, they would generally speaking have to integrate with five, six, seven, different vendors to be able to build a proposition. They would then have to go and sign up banking relationships, which is not easy. And they would then have to go and do compliance and regulatory hurdles that they needed to cover, and so on.
“So this fintech-as-a-service, it just means that you're enabling organizations on a very light capex model to be able to grow. So our business model is we grow with you. We charge transactional fees, etc. And as you grow, we grow.”

How important are APIs as an engine for your business?

“Everything runs on APIs all in the background. So there's very little that actually happens without initiating an API in the payment space. So from a fintech perspective, definitely. And one of the things that we've done very well is that everything that we've built has been, cloud native and API first. So all of our channels are API driven.”