When last we checked in with Koho, the Vancouver-based FinTech company was fresh off a new round of funding from Power Financial and a slew of angel investors, while prepping for the staged beta rollout of its mobile solution designed to manage your money – a veritable Summer of Koho.
It didn’t quite go as planned, with Koho cards not going out to beta testers until November. “You learn new things and it takes longer,” Daniel Eberhad, Koho’s co-founder and CEO, told BetaKit.
“All the stats lead to one thing, which is that we feel like we absolutely have a great beachhead for any consumer in Canada.”
– Spencer Chen,
Since November, Koho has learned a lot about what its customers want from the front-end finance management app, having now processed over $1.3 million in transactions from over 1,000 users. Eberhard says the extra months of preparation allowed the app to achieve ‘feature parity’, meaning Koho can now be used to pay bills, send e-transfers, use ATMs, and make purchases. While the company isn’t offering its customers a bank account, there’s now very little that can be done with through a traditional bank account that can’t be done via Koho.
Beyond the basics, Koho’s VP of marketing Spencer Chen indicated that the company’s focus on value-added insights, goals, notifications and human-powered customer service are driving a “virtuous cycle” of activity within the app. Following an initial minimum deposit of $20 to help users “get skin in the game,” Koho found that the average second deposit amongst beta testers was a 9x increase, with many testers regularly depositing 1/3-1/2 of their paycheques into Koho.
While Koho’s initial target for its beta was the oft-sought millennial user, the company was surprised to find an age gamut of 18-65 using the app, with a significant percentage in the ‘older’ millennial and Gen X range (i.e., young enough to have no love for traditional banks, but old enough to have money to save and spend).
“The product itself is exceedingly horizontal,” Chen said. “All the stats lead to one thing, which is that we feel like we absolutely have a great beachhead for any consumer in Canada.”
The beta traction is exciting for a product that many doubters believed would never get to launch in Canada. Now launching publicly across Canada, the question now becomes whether or not Koho can overcome the hurdles facing every young FinTech company: cost of customer acquisition and the trust battle with incumbent banks.
“Our acquisition cost is way below industry average, it takes people 3 minutes to get an account, and their engagement is 8x.”
On the customer acquisition front, Koho feels that its demographically horizontal product and virtuous cycle of user activity will help keep costs low (this is your regular reminder that Koho is backed by Power and therefore has access to a FinTech Justice League that can conceivably share customers cheaply). In terms of competing with incumbent financial institutions, Eberhard is blunt.
“We think we can win Canada relatively quickly,” he said. “Our acquisition cost is way below industry average, it takes people 3 minutes to get an account, and their engagement is 8x.”
That 8x engagement rate over traditional banking apps is impressive, but Koho’s focus on customer activity and satisfaction over traditional finance metrics (“a bank measures churn by ‘did you take an action within 3 months’,” Eberhard told BetaKit) also points to the broader opportunity of FinTech as a disruptor. The distinction is especially poignant at a time when Canadians are learning their financial interests are likely misaligned from those of the big banks.
Koho has set an aggressive target for the Canada, hoping to capture anywhere between one and five percent of the market in the next 12 to 18 months. “We didn’t enter Canada for a 10-year horizon. We think we can win five percent very quickly,” Chen said.
To do that, Koho will need to raise additional funding (the company has raised $2.6 million to date). Eberhard wouldn’t name any names, but indicated there are many potential strategic investors beyond the big five Canadian banks.
“If you consider anybody who sells financial products in Canada who isn’t a Big Five bank, I would look to those people to be strategics,” he said. “Ninety percent of the market is owned by five entities, and I think that one of the narratives that doesn’t get enough play in FinTech is the huge opportunity for tier-two banks, insurers, who with FinTechs can have a meaningful conduit to do something pretty aggressive.”