FinTech is fast becoming one of the most popular sectors in Australia to launch a business in. Stockspot, which announced a $1.25 million funding round last week for its automated investment advisory and fund management platform, is one of the first startups of its kind to enter the Australian market. Based on data we’ve analysed here at Startup Daily, online brokerage style startups will likely dominate the FinTech space, especially once would-be startup founders discover new platform Third Party Trade.
Third Party Trade describes itself as a new kind of online broker. Traditionally, if you were to use an online brokerage platform, a user would go to that company’s website or mobile application.
Whereas Third Party Trade has taken all the core features of what it means to be an online brokerage platform and broken it down into an API platform. This way, anyone – whether they’re an existing online broker or an Australian startup founder looking to launch a new business – can integrate with its service and instantly tap into the US market.
Essentially the API based platform adds a US trading capability and US brokerage capability to any new FinTech platform.
Third Part Trade was founded by Michael Giles, who began his career in online brokerage in 2004. After spending some time in the space learning the ropes, he eventually got his own financial services license and launched his first company Robo Invest, which in reality was most likely one of the first local iterations of what a startup like Stockspot is today.
In 2010, Giles discovered there were a lot of features he wanted to add to the Robo Invest platform that he was unable to, purely because he couldn’t gain the access to them. That was until another FinTech startup e-trade released an API that Giles was able to then use to access markets and features he needed in order to grow Robo Invest.
It was during this time that the early idea for Third Party Trade crept into his mind. He recognised an opportunity to become a platform, rather than just a service in the FinTech space – essentially becoming a brokerage infrastructure service that other financial technologies could leverage off, without people having to rebuild this portion of infrastructure every time a new company or project launched within the space.
Eventually, Robo Invest was acquired and merged with a US-based business Pentrade, owned by the Idaho-based Pennaluna & Company.
Although Giles has based himself and Third Party Trade out of New York City, the startup has a real Australian focus.
“Australia is our focus market and it’s an exciting place to be at the moment. I would be very happy if we were even just a US company servicing Australia, because clearly being Australian, I have this desire to provide our services to that market, but more importantly, there is a need for what we have in Australia. There is currently no easy, low-cost way to set up an account and make an investment into a US-listed company. It’s just not there,” he said.
The Third Party Trade business model is perhaps one of the simplest in the world. Eventually, people will be referring to it as the “Stripe” or “Braintree” for online brokerage.
When someone does a trade, the startup charges a commission on that trade. However, because part of the FinTech brokerage movement operates with a ‘commission-free’ USP for their clients, the Third Party Trade platform has the ability to customise its offering for those companies. They have the option to pay a monthly fee for access to the TPT infrastructure.
Giles told Startup Daily that coming up with these customised solutions is becoming quite a popular alternative to the traditional clip-of-the-ticket business model that makes up the bulk of the business.
The startup is beginning to gain some significant early stage traction across Australia, especially amongst existing online brokers and established startups. While these types of businesses offer valuable products and have a growing number of users, the challenge they face is that they are not licensed broker-dealers in the US. As such, they cannot deal in securities, and have no way of adding this to their offering unless they piggyback off a platform like Third Party Trade.
While Giles admitted to raising a small amount of capital for Third Party Trade, he said he wants to bootstrap the company as much as possible and grow via sales.
“I am keeping this one very lean,” said Giles. “I put all of the key pieces in place before I really needed much capital, and now we’ve got it to the point where it’s launched and we have sufficient funds to continue to build out the business.”
“It’s also the type of company where there’s no ambiguity around the business model: someone opens an account and they pay for trade, which generates revenue. So it’s not the same as other sites where they have to search for a business model.”