Dear Luc: When is the best time to expand my fintech abroad?
In Dear Luc, we answer the questions the industry’s fintech founders are too afraid to ask, and solve the problems they don’t want their VCs to know about.
From regulation readiness to technology teething troubles, our start-up agony uncle, Luc Gueriane, is here to help.
Luc has over seven years’ experience working with flagship fintechs like Revolut, Transferwise, Monzo and Curve.
His expertise and extensive work in the fintech ecosystem mean that Luc is able to offer unique insight into the building of a successful fintech company.
You can read our first fintech confession here.
Confession #2: Not ready to go global
My team is pushing for us to move into new markets, but I’m not sure we’re ready. When is the right time for a fintech to go beyond our domestic market (the UK)?
Moving into a new market is no mean feat – especially in fintech. There have been some high-profile successes but also some high-profile failures.
You can’t assume because you’ve been successful in one market you’ll be successful in other markets. In my opinion, there are six key factors that need to be considered when considering market expansion:
- No cookie cutting: You can’t necessarily move a product to a new country in the same format. Each country has its own regulations, price points and product requirements. You need to be aware of how you’ll have to edit your product or service to make it work internationally.
- The C word: Never underestimate the regulatory difference between countries, and the potential resources that comes with it. What works from a compliance standpoint in the UK, doesn’t work for a German programme and so forth.
- Has the customer changed? You need to think about the demographic that you are currently catering to and then understand if the market you want to move into has a similar demographic audience. For example, some countries might have a larger unbanked population who are looking for fintech products to fill the void, but that doesn’t exist to the same degree everywhere.
- What does success look like? Assess what you want to achieve through expansion – Is it better for you to have a larger market penetration in a smaller country than a smaller market penetration in a larger country? Does your expansion need to be like Monzo trying to break the US, or could it be a smaller scale project? There is potential in something that doesn’t create as much hype to begin with but could have later buy-in. France, for example, is crying out for more fintech propositions.
- Do your research: You don’t want to spread yourself too thin, you want to make sure your tried and tested approach is succeeding in the market you’re operating in, and then do market research to understand whether that approach would be successful elsewhere. If the research concludes that you have what it takes to expand, then that is the right time. Don’t make decisions based on gut feeling or competitor envy.
- All-in buy-in: Once you’ve established feasibility, there is a final hurdle that is often overlooked: You’ll need buy-in from the whole business to get behind the expansion as so many will be involved in the process. Without consensus, expansion will be much more challenging and less likely to be successful.
After considering all of the above, if you are have decided to expand, this should guide your next steps.
First decide which country you’d like to expand to and consider these factors:
- The market readiness of the country – is there an appetite for the product?
- Regulations within that country – do you understand what it takes to operate there?
- Support – how much of the existing domestic product can be recycled into another country? Are your integrations in place with your various partners, like the BIN sponsor or processor etc?
I’m sure you saw this coming, but the “right time” to expand is wholly dependent on who you are, where you want to expand to, and what you want to achieve.
This is one of the biggest decisions a company can make. But with careful consideration – taking into account the points I’ve raised above – expansion can be successful and a growth driver for your business.
Do you have an embarrassing question you want answered, or a seemingly unsolvable problem you’d want help with? Post an anonymous comment below, or email FinTech Futures’ Alex Hamilton in confidence.