In a move that underscores continued investor interest in financial technology (fintech) platforms in SA, local start-up TurnStay.com has secured over R5m in funding from US investors that will be used to expand its operations in Africa.
On Monday, the travel-focused fintech operator said it had secured $300,000 (about R5.4m) in fresh funding from Silicon Valley and New York-based investors DFS Lab and DCG. The company plans to use the cash injection to expand the business into Africa and “build on the significant traction already achieved.”
“Securing funding from these US investors is a vote of confidence in our business model, which has already processed more than R50m in transactions,” TurnStay CEO Alon Stern said.
The business was founded by a team of experienced entrepreneurs in Stern, who is also co-founder of Slide Financial, and James Hedley, co-founder Quicket.
TurnStay specialises in reducing the cost of getting paid for African merchants and platforms in travel and tourism. The company says it does this by harnessing “the same ‘tricks’ used by the world’s biggest booking companies”.
According to the company, getting paid can be expensive in the travel industry, as payment fees and fees levied by online travel agencies are added.
An example: A European customer books a SA hotel through Booking.com. The website bills the card in Euros in Europe, where payment processing is much cheaper, resulting in a card fee of about 0.3%. However, if the hotel bills the client’s card using an African payment company, the transaction fees could amount to more than 7%.
Consequently, payment fees for African hotels can be as much as 20 times higher than those of Booking.com.
“The average merchant spends 12% of revenue on getting paid — often, this can be the difference between making a profit or a loss and dramatically affects the viability of many businesses in a sector that employs more than six-million people in Africa,” Hedley said.
The company achieves this by using a global network of “compliant companies”, which in turn reduces the cost of international payments for hotels without compromising on safety or efficiency
To keep merchants on its platform happy, TurnStay offers lower card fees, a better checkout experience and more direct bookings, which allows properties to compete with online travel agencies with improved conversion rates.
The payment option integrates with widely used booking engine providers such as Benson Software.
“TurnStay creates a localised payment experience, charging clients in their home currency using familiar payment methods when booking accommodation. TurnStay’s solution has reduced costs for some clients by 70% and halved the number of unnecessary failed transactions. With a better checkout experience, sales conversion rates soar,” said Stern.
This latest deal adds to the ongoing trend of deal activity in the local fintech space.
At the start of 2024, MTN's group fintech business received a $200m investment from MasterCard for a 3.8% stake in the unit.
In late 2023, local payments platform Peach Payments concluded a R579m funding round led by UK-based asset manager Apis Partners, a deal that was first announced in April of that year.
The largest capital raises in recent times for local start-ups have been: $120m for Jumo, led by Fidelity Management & Research, with a $400m valuation; $48m for Ozow, led by China’s Tencent; and $83m for Yoco. All three are fintech firms. Insurance technology platform Naked recently raised $17m in a third round of funding.
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