The challenge: finding an affordable and seamless way for users to fund their portfolios
Initially, Franc users only had the option of funding their portfolios by setting up a payment through their banking app. However, this meant that users had to break out of the app, which introduced a natural friction point in the onboarding journey.
Obvious alternatives would be to allow users to pay via debit card or collect via debit order, however the high fees associated with card payments and debit orders went against Franc’s mission and essence—which is to make investments accessible to everyone regardless of how much you have to invest. Franc offers no minimum investing so any costs borne by the customer or Franc associated with depositing could be high relative to the investment amount and therefore eat into returns or fees
As Franc continued to scale, they realized they needed a better way to enable users to add money to their portfolios, at zero or low cost, that wouldn’t impact conversion.
“50% of our customer base are regular investors, investing every two weeks or every month. So, imagine a client who wants to make a R20 transaction being charged R8 in debit order fees?”, says CEO Thomas Brennan. “It didn’t make sense for our business model, so we were on the lookout for a solution that would work for us and our clients”.
The Franc team looked to electronic fund transfers (EFTs), the most popular alternative to card payments in South Africa.
Manual EFTs, as they are popularly referred to, are cost-free for the merchant. But they come with certain limitations. First, users have to leave the merchant’s app environment to initiate the transfer. Second, manual EFTs are error-prone because of the amount of user-generated input required. In Franc’s case, users had to enter Franc’s banking information and a unique reference code, made up of their first name and a number, to make a transaction. There can also be reconciliation issues if a user enters their reference incorrectly. In addition, manual EFTs do not provide any form of visibility to the user or merchant regarding the status of the transaction while they wait for it to clear. This leads to a sub-optimal user experience, with significant room for error.
For Franc, these issues resulted in high rates of drop-off.
To surmount the problems with manual EFTs, Franc first looked to a leading instant EFT provider. However, that didn’t solve the problem related to high fees.
Franc turns to Stitch for a more affordable solution that provides low-user friction
“Our user conversion increased by 50% after switching to Stitch Instant EFT”– Thomas Brennan, Franc CEO
“With Stitch, we get the most affordable rates we’ve seen so far. And the friction of users having to go to their banking app and set up a payment is gone. Thus, abandonment rate has dropped and user conversions have almost doubled [since card],” says Thomas.
With a bright future ahead of the team, Franc will no doubt grow aggressively across the continent, looking first to target markets that have a high savings culture and low investment rate.
Stitch is committed to being the pan-African open banking API provider, growing alongside clients like Franc to support their needs across the continent.