There is this notion that investing is only for the rich, but the idea couldn’t be further from the truth. Enter Franc.app – an investment app that was conceptualised in 2018 when an engineer, actuary, investment guru and a tech whizz shared a common vision for helping more people invest more by making investing affordable, accessible and social. We chatted to Franc to find out more about the award-winning app that makes investing simple.
Franc was founded based on a very real need – that among the G20 countries, South Africa ranks the lowest in household savings rate. In 2019, the ratio of household savings to disposable income was at 0.15%, which means the ability for a household to weather financial shocks was at an all-time low. And less than 4% of South Africans invest outside of a retirement scheme, compared with 52% in the USA. The need for savings and investments has come into alarming focus during the COVID-19 lockdown, in which households have been put under severe financial stress. Alarmingly, only 6% of South Africans will be able to maintain their standard of living after retirement, with 40% having no formal retirement savings. Yet, South Africa is one of the top 5 countries in the world for the search term ‘how to invest”, which means more South Africans are asking Google how to invest relative to the population size than the US, the UK, Australia, Canada. Currently only Nigeria and Singapore are more interested in investing than South Africa. So evidently there is interest but barriers which limit access.
This is something Franc wants to change, by providing access to high-performing, low-cost investments through a simple and intuitive mobile app.
Franc’s founders believe that too many institutions have made investing overly complicated, with excessively high minimum investment requirements and exorbitant fees. Franc has removed all of those barriers, by doing three simple things: Firstly, by removing investment minimums so every South African can invest for their future. Second, they have simplified investing down to just 2 funds (Allan Gray Money Market and Satrix 40 ETF – a passive equity fund). Investment giants, including Warren Buffett, have recommended passive tracker funds for the vast majority of individuals who are not professional investment managers. Lastly, making it easy by enabling access through a simple and user friendly mobile application that users can access whenever and wherever they are.
Franc may be considered a startup, but is already off to a great start, having received funding from investors such as Fitech Ventures (who’ve invested in other financial startups such as Ukheshe and Bettr bank) as well as AndAfrica LLC, a Japanese firm connecting Japanese investors to African tech companies. Franc’s previous awards also include: winning the start-up competition ‘Seedstars’ in 2018, winning best South African Solution award at the MTN App of the Year awards in 2019, as well as scooping Stuff Magazine’s Top Financial App in 2020. More recently, they were selected as one of 20 startups across Africa to be part of Google for Startups Africa Accelerator, which kicked off last month.
Entrepreneurship in coming years
“In many ways I came late to the party. My background was electrical and computer engineering, but by twist of fate, I spent my earlier career in academia doing my PhD at Oxford and post-doctoral research at MIT – both incredible opportunities and experiences. That said, at the onset there is a lot of hype and a lack of transparency about what it takes to get a business off the ground. I think largely because people are trying to capitalise on the information asymmetry, either as early stage investors, lawyers or advisors. However, when you pull back the curtain it’s not rocket science”, says Dr Thomas Brennan CEO and co-founder.
“I think if we can demystify what building a business actually means and what it takes, what are the best practices, free resources and tips, you’ll see a lot more people willing to take the plunge. Most people do a simple risk benefit analysis and in a place like South Africa with such a skills shortage, there will always be a corporate job with a nice paycheck making taking the startup route (often without pay) even more difficult.”
“I am seeing more and more young graduates opt to get a job with a startup instead of corporate (despite the lower pay), which I think is great, because it gives them first-hand experience into what it takes to build a business. That’s what I would advise any young person who wants to be an entrepreneur but doesn’t know how or can’t take the big risk of going solo – basically learn on the job, then go solo once you’ve built up the confidence and expertise you need.”
Every Start Up Faces Challenges
Tom believes the biggest challenges Franc faces is building trust – if one considers how many consumers are wary of financial institutions, because of high fees, or having fallen prey to fraudulent activities on their accounts or been scammed by unscrupulous entities.
“In addition to trust, the cost of collecting money is painful. I mean, how can you tell someone who can only invest R100 that he has to spend close to 10% of his monthly contribution on a debit order? The current system favours those who already have large transaction volumes. Open Banking has largely levelled the playing fields in the rest of the world, but is being aggressively suppressed here for obvious self-interest. In many ways, we’re operating in a cartel-like polygopoly that disenfranchises the poor.”
Growth Strategy: Onwards and Upwards
Seb Patel, COO and co-founder, says the business’s primary focus is on customer acquisition – to get as many people as possible to download the app and start their investment journey.
“We started off growing organically through word of mouth when we didn’t have much of a budget, but as we got funding on board we started expanding our channels of advertising. That said, we still want our customers to be our brand champions and be the ones marketing the business for us after they’ve had a great experience using our product – which includes the educational content posted weekly on our blog.”
Franc hopes that the platform will assist millions of South Africans break the cycle of debt and dependency, and help them realise their financial dreams. Their mission is to build Franc into a trusted and household brand, recognised for relevance, honesty, transparency and integrity.