Myth-Busting on Expanding into Europe
Craig James, CEO of London-based compliance consultancy Neopay, delivered a talk at the All Payments Expo in New Orleans on March 22 to help companies eyeing Europe as an international expansion market. He focused on dispelling common myths about the process. His key point: “There’s no substitute for work.” For example, he said many companies try to use templates to explain their business model, infrastructure and compliance practices to regulators—basically filling in the company name into an existing document. This is a mistake, according to James, who says the regulators will spot templates and be suspicious of companies trying to use them. In addition, using a template is likely to prompt the regulator to ask you to withdraw and resubmit your application, he noted.
Many people also believe they don’t actually have to have boots on the ground to expand into Europe, which is another myth. “You need an office, a place to receive mail, take calls and at least two residents of the country working for you,” James said. Prior to the financial crisis, you may have been able to do business that way [remotely], but it’s no longer the case, he explained. James also cautioned companies against the idea of thinking they can simply send a U.S. director overseas would be a quick fix. “You’re not going to get a visa overnight,” he said, noting that he’d seen launches get stalled because the company had to wait for immigration.
And although Europe may be a single market in terms of overarching regulations, called directives, you don’t want to try and launch in every European country at once. “Why would you want to fight a war on 30 fronts?” asked James. The cultural nuances, languages and logistics of serving so many different consumers would need hundreds of millions in revenue to justify the investment. Instead, James suggested picking one market that makes sense from a strategic standpoint, i.e., where you’re headquarters are, where you have distribution partners or a customer base.