Fintech is a huge growth area and, as you transition from start-up to scale-up, you might find yourself looking at new geographic markets. You’re not alone: 68% of fintech executives expect to expand into new markets in the next 18 months, with nearly one-third saying they are ‘ready to expand now and actively seeking growth opportunities’.
As you eye up opportunities in Europe and beyond, you’ll find yourself in good company. Just recently, Curve turned to crowdfunding to supplement the £72.5 million Series C it closed in January in order to expand across Europe. And this came hot on the heels of Revolut pledging to reach 1 million users in the US by the end of 2020, and PayPal establishing a foothold in China through its purchase of a majority share in GoPay, a local payments company.
But before launching into multiple territories, a lot of research is required. For example, is there a market for your product, will the way you market your brand resonate with consumers in a different country, what cultural considerations do you need to take into account, and do you fully understand the regulatory landscape?
Navigating a new regulatory landscape
Launching into a new territory presents challenges for any business – from recruiting and retaining talent to going head-to-head with the local competition. And, for a fintech, there’s the added obstacle of understanding and observing the regulatory obligations of every market in which it operates. That’s in addition to adhering to laws regarding data protection and payment services security, as well as anti-money laundering and anti-terrorist funding rules.
Chances are you’re familiar with the situation in Europe, where open banking regulations continue to foster new business models throughout the region. The EU passporting system, which enables businesses that are authorised in any EU or EEA state to trade freely in any other EU or EEA state with minimal additional authorisation is an attractive proposition. In fact, 81% of all fintechs in Western Europe actively operate in eight or more countries. And so it might come as no surprise to hear that, following Brexit, many fintechs – including Stripe and Coinbase – moved their regulated operations to Dublin in order to continue to benefit from the system.
Looking further afield? By 2024, half of all global fintech revenue is expected to come from the APAC region, with China expected to account for 82% of APAC revenue. But while the introduction of the Foreign Investment Law in China in 2020 provided fintechs with more protection and transparency to operate within the country’s borders, the extent and complexity of the Chinese fintech marketplace means it’s not regulated by a single standalone body – and so extensive regional research is required.
Indian regulatory authorities (including the Reserve Bank of India) have adopted a consultative approach to the sector, providing an accommodative framework and creative environment that’s designed to encourage innovation – but how long this lasts is yet to be seen, and the recent stand on cryptocurrency and payment regulations by the National Payments Corporation of India could be a taste of what's to come. While in Singapore, the Monetary Authority of Singapore (MAS) is renowned for its commitment to supporting fintechs and the 2020 Payments Services Act has made it easier for businesses to obtain licenses and aims to support e-money payments providers as they enter the mainstream.
On the other side of the world, the activities undertaken by a fintech company in America are subject to laws and regulations at the federal and state level. As a result, the number of potentially applicable US regulations to any single fintech firm is seen by some as a potential barrier to entry. That said, following Brexit, the US has overtaken the EU to become the most popular market for aspiring UK scaleups who are looking to expand overseas.
Wherever you plan to launch, remember that the cost of non-compliance can be high, so make sure your fintech has access to legal and regulatory expertise (either in-house or via a third-party consultant) to avoid getting it wrong.
Appealing to different cultures
One word: localisation. A recent global study showed 76% of people are much more likely to buy goods or services online from a provider that communicates with them in their own language. But it’s not as simple as translating your existing marketing collateral. Providing financial services in international markets requires a sound understanding of specific terminology and cultural context. That’s why it’s important to spend time coming up with a localisation strategy that outlines:
- How to adopt your brand’s tone of voice to fit audience preferences in the new market
- How your target audience’s age, education and income might influence the phrases you use in the new market
- How your target audience commonly spends or saves their money, so that you can demonstrate you understand the challenges and opportunities they are facing
Top tips to take your fintech to a new territory
Keep it simple. You’ll be amazed at how much can be achieved through a little desk research. Below we’ve outlined the key criteria to keep in mind as you embark on your decision-making process.
1. Establish your budget
Ask yourself: are we getting ahead of ourselves or do we have enough capital to either gain or create market share? To give your budget a boost, you could also look at the funding and investment scene in any potential new territory.
2. Understand the landscape
Look for the sector’s largest ‘total addressable market' – the total market demand for a product or service, calculated in annual revenue or unit sales if 100% of the available market is achieved – and identify growth areas. Remember, it’s always better to be on a moving train as opposed to being stuck at the station! In addition, what does the media landscape look like – in other words – what channels do people turn to for entertainment and information? As a starting point we suggest you conduct some basic desk research, pulling information in from publicly available resources where possible.
3. Explore customer demand
Before you even think about drumming up demand with an attention-grabbing marketing campaign, you need to understand if there are prospective customers in your new territory. And if so, will they be interested in your current product or service, or will you need to adapt your offer? How mature is the market and can you offer enough points of difference to stand out from the competition? Similarly, if it’s an emerging market, can you afford to educate prospective customers?
4. Get regulation ready
As outlined above, understanding regional and national regulations is key. Do your research and consider reaching out to a local market expert to strengthen your understanding of how various rules might impact the way your business operates.
5. Know your key competitors...
Are they local or global? How many are there and what share of the market do they have in each potential territory? In addition, research what has and has not worked for the current companies operating in the sector and – perhaps most importantly – look into what they are planning.
6. … and your prospective customers
How does your current customer base compare to those in a new territory? Are you confident you can reach this new audience, and will your products or services appeal to them? Ask yourself: what does this new audience want – what are the gaps in the market, and where are the opportunities?
Ultimately, it’s all about being prepared. You’ve got a great product and a tried-and-tested business model. But when it comes to entering a new market, it’s important to resist the temptation to run before you can walk. Work your way through these key considerations (use the table below as a guide) and you’ll soon have the knowledge and expertise you need to take on the world.