There are two ways to grow a business. The first is to grow your user base; and the second is to grow profits (specifically, profit per user). Although the two methods are not necessarily mutually exclusive, startups tend to choose one or the other. Over the past two years, Sydney-based FinTech startup Pocketbook decided to focus on the former; and is now finding ways to generate revenue through value-adds. On Wednesday, Pocketbook released its Tax Returns iPhone app, allowing users to lodge their tax return in 10 minutes. The app provides us a glimpse of Pocketbook’s monetisation strategy.
The Tax Returns app guides the user through a set of questions; and once completed, a registered tax accountant will review the answers and finalise the return for $39. Users can snap photos of key documents via the iPhone’s camera and the app will file them where needed. Added to that, users can message their attending accountants directly within the app should they have any questions.
The registered tax accountants reviewing the details for users are from Refund Express, an online tax services provider. Bosco Tan, co-founder of Pocketbook, said Pocketbook partnered with Refund Express because the two companies are similar in their design principles: both believe in simplicity.
The $39 price point is significantly lower than a face-to-face consultation with a tax accountant, who would typically charge between $100 and $200. The same goes for email consultations. Other online tax return applications – even clunky, Web 2.0-style ones – also charge north of $39.
It should be noted that $39 is the charge for basic returns – that is, for people who simply generate income from work, government payment programmes and/or via bank interests. If the user owns shares in a company or has dividend income, it will cost an extra $10, increasing the price to $49. Users who want the payment to be taken out of their tax return – rather than paying upfront – will be charged an extra $20 on top of $39 or $49, which is still cheaper than other options.
As of yesterday afternoon when Startup Daily spoke with Tan, 30 tax returns had been done and dusted, which means the app generated over $1,100 in revenue in its first day.
Tan told Startup Daily that one of the reasons why he and co-founder Alvin Singh created Pocketbook, the expense tracking and budgeting app, is to help people have their financial information organised for tax time.
“Tax is really important to us as a company because it’s a critical component of why our original product exists,” said Tan.
But it wasn’t until the beginning of the 2015/16 financial year that the co-founders realised how unsatisfied people were with existing options. Tan said Pocketbook was receiving feedback from people wanting to lodge their taxes through a seamless mobile app.
“We know how to deliver great mobile experiences, and so last year we vowed to create a tax returns app,” said Tan. “With the app, people can start and stop whenever and wherever they are. They can start lodging while they’re on the train, and finish when they’re home. They can lodge their tax returns on the go, which is critical to the mobile experience.”
A few days prior to launching Tax Returns, Pocketbook released its Tax Calculator app. Tan said existing tax calculators were either working out a user’s tax return based on their salary or on the income bracket they fall into. None of them, according to Tan, deliver a great experience. Added to that, the results can be way off the mark.
As mentioned earlier, Pocketbook has been firmly focused on growing its user base. Now that Pocketbook has well over 100,000 users, and plenty of financial data, especially around users’ spending habits, it is now looking at opportunities to add value to users.
The Tax Returns app is the first example of how the company will build and monetise its offerings. Tan told Startup Daily that they’re looking to add value in areas like housing prices, mortgages and interest rates.
“One of the things that people need to realise is, instead of changing their spending behaviour, there are better interest rates out there in the market that can contribute to drastic savings. People don’t necessarily need to change how they spend their money,” said Tan. “Thematically, these are the things we’re looking at to see how we can add value to users through technology, and make money by delivering great experiences.”
While data insights will drive Pocketbook’s monetisation strategy, Tan stressed the importance of listening to users, especially in a constantly evolving consumer landscape.
“We came to the realisation that the cues we take to move forward really lies in what our user base and audience tell us. It doesn’t come from trying to copy what other people are doing, but [leveraging] our strengths in building products, and then looking at what our users are telling us. Data is a key component of it, but so is listening to our users,” said Tan.
“We get about 50 emails a day. Alvin and I go through it ourselves because we recognise the importance of being in touch with what users are saying and let that guide product development. Sometimes it’s positive feedback, sometimes it’s issues with things, sometimes it’s suggestions about what features they would like to see.
“But when we went out and asked our users ‘if we were to build something around tax, what would you like?’ Everyone said ‘lodge’. That really helped us formulate what to do next.”
Pocketbook does plan on raising additional funds in the future, but is currently focusing on getting the tex returns experience right.
“July to October is a critical time to make sure it works well and it’s a success. We’ll decide what to do next after that,” said Tan.
Disclosure: An investor in Pocketbook is also a shareholder of Shoe String Media, which owns Startup Daily.