Purple Group: Investing is not so easy

Retail clients of Easy Group, Purple Group’s flagship investment platform, generated returns of about 7.5% from South African equities over the six months to February. That sounds respectable in isolation, but well short of the nearly 30% delivered by the JSE over the same period.

The sizeable gap of more than 20 percentage points inevitably revives an age-old debate: is it better for the average retail investor to trade individual shares or simply track the index?

EasyEquities caters to both approaches, but for Purple Group the distinction is more than academic since passive investing typically implies lower trading activity. That has direct implications for activity-based revenue, which still accounts for about half of the group’s income.

At the same time, the inherently gamified nature of markets — amplified by features such as real-time price alerts, trending stock lists and instant trade execution — can encourage more frequent trading, blurring the line between investing discipline and entertainment.

CEO Charles Savage is acutely aware of this tension. His longer-term focus is on increasing the contribution from more stable, asset-linked income streams. “Have your non-activity revenue produce a profit and treat activity revenue as the icing on the cake,” he says.

Interim results highlight the strong operating leverage of the business. Group revenue rose 8.8% to R258m, while operating costs were largely flat, up just 0.5%, driving a 33% increase in profit before tax. The real momentum sits within the Easy Group — the EasyEquities ecosystem — where revenue grew 18.5% and profit before tax surged 66%. As Savage puts it, “for every rand that we spend, we’re getting R11 in revenue”.

That momentum shows little sign of slowing. Active clients increased 21.9% to just under 1.25-million, while total client assets climbed 41% to R94.9bn. “It’s a snowball rolling downhill,” Savage says, pointing to a model where referrals from existing users are playing an increasingly important role.

Clients are not just signing up, but also funding accounts and adding capital. Savage attributes this to improved conversion, with the group becoming more effective at turning registered users into active investors through better data use and targeted engagement along the onboarding journey. That is reflected in the average client now using at least two products across the ecosystem. As Savage notes, “the most expensive customer to acquire is the first-time customer, and the cheapest is the one who buys a second or third product”.

That logic explains the steady expansion of the Easy ecosystem from equities into ETFs, crypto, retirement products and beyond. It also explains why Purple is willing to tolerate a degree of complexity creeping into the platform, even if it risks diluting the original “easy” proposition.

Critics argue that the proliferation of products undermines the simplicity that made EasyEquities successful in the first place. Savage does not dismiss the concern. “The criticism is fair,” he admits, acknowledging that more products inevitably introduce friction.

The response, he argues, is not to limit product expansion but to improve the user experience. The group is investing heavily in platform redesign, AI-driven personalisation and customer service, all aimed at restoring simplicity at scale. He cited EasyProtect, its life insurance offering, as an example of a strong product that will benefit from better placement on the platform.

No technology opportunity has excited me more than placing AI at the centre of the intelligence of our operating system

—  Charles Savage

Not all parts of the business performed flawlessly. The headline numbers were dampened by a R21.3m hedging loss in EasyTrader, the group’s leveraged trading platform (formerly GT247). The loss stemmed from a breakdown in correlation assumptions within its hedging model — essentially, assets that were expected to move together did not do so. Management has since moved to a like-for-like hedging approach, with Savage noting that “we’ve eliminated all of the correlation risk in our hedge book”.

International expansion remains the biggest long-term wildcard. The long-gestating Philippines project is finally live in regulatory sandbox mode. The addressable market is substantial.

Purple has partnered with GCash, the Philippines’ dominant digital wallet platform, which serves more than 80-million users. Crucially, no major competitor there offers retail investors easy access to international markets, while the domestic stock market is tiny. Savage sees a realistic path to 500,000 active users by end-2027.

Kenya, meanwhile, is edging closer to launch, offering a second African growth leg. Both expansions reflect an effort to replicate the EasyEquities model in underpenetrated retail investment markets.

Back home, innovation continues. In February, EasyEquities became a founding distribution partner for ZARU, South Africa’s first institutional rand-backed stablecoin. A stablecoin is essentially a blockchain-based digital token pegged one-for-one to a fiat currency (in this case the rand); this allows instant, 24/7 cross-border transactions while keeping reserves within the South African financial system. For clients, it offers a new way to move and hold value; for Purple, it opens an additional layer of engagement within its ecosystem.

Then there are EasyTrader 2.0 and the planned introduction of prediction markets. This is a fast-growing global trend that effectively allows users to trade on the probability of future events. These initiatives are aimed at broadening the platform’s appeal, particularly to more active or sophisticated users, while diversifying revenue streams.

Savage is not shy about sharing his own investment views. Right now he sees commodities as an attractive theme, fintech as structurally compelling and SA Inc businesses as increasingly interesting after years of neglect.

Offshore, he remains positive on tech stocks despite recent turbulence, arguing that the immense AI capex under way will eventually justify itself. His enthusiasm for AI is unmistakable: “In my 25 years of being involved with Purple Group, no technology opportunity has excited me more than placing AI at the centre of the intelligence of our operating system.”

The client demographic remains enviably young. The average South African EasyEquities user is just 32, giving Purple decades of potential lifetime monetisation runway. That matters, because financial platforms become exponentially more valuable when they capture customers early.

There are risks, of course. Market returns will not always be as supportive as they were in the period under review. Interest rates, which influence retail inflows, have already moved to a more neutral stance. And the balance between simplicity and product breadth will need careful management.

For now, momentum in clients, assets and engagement shows little sign of slowing. EasyEquities has evolved into a scaled financial ecosystem with clear network effects, improving unit economics, a young and increasingly sticky customer base, and multiple embedded growth avenues, offshore as well as across adjacent fintech products.

While the data suggests many investors would be better served by a more passive approach — a shift that could dampen Purple’s activity-driven profits in the short term — it is arguably less fun and, for many, less educational.

It will also be instructive to see how client portfolios perform in a meaningful bear market. If they prove more resilient on the downside, some of the current underperformance may simply reflect a more defensive positioning. That said, beyond academic curiosity, most investors would probably prefer not to test that theory.