Fintech’s international expansion is getting interesting

Faced with profound uncertainty during the pandemic, fintechs ditched their expansion plans. Now that tide is reversing.

The most successful fintech pitches to investors rarely miss out on a slide on international expansion. 

Such is the expense to fund a loss-making potential future unicorn startup that the unit economics only makes sense in a 5-10 year time frame, the typical VC fund life cycle, if you plan on succeeding in multiple geographic markets. 

Monzo’s original pitch deck for example contained a slide saying the startup was building ‘a bank for a billion people’. 

Nonetheless, international expansion - as it turns out - is hard. 

Scaling a business in one market is tough enough but multiple geographic fronts is nigh an impossible task. 

Fintech companies tackled the problem with aplomb…at least until the pandemic turned everything on its axis almost exactly three years ago. 

Faced with profound uncertainty, companies, by and large, ditched their expansion plans - or at least put them on ice - and concentrated on their core customers and revenue strategies as investors began to demand an acceleration to profitability. 

Now, it seems international expansion is back.

This week Revolut launched into one of the most exciting fintech markets in the world Latin America, where it will take on one of the most successful fintechs at international - or at least regional - expansion Nubank. 

“Brazil is an exciting market for Revolut and holds enormous potential for our global expansion,” said Nik Storonsky, co-founder and CEO of Revolut.

“Our mission is to unlock a borderless economy with financial products that are accessible and easy to use and that allow our customers to use their money efficiently. We will start with the global account and crypto investments, but this is just the beginning,” he added

US-based Brex also revealed a huge expansion of its business internationally this week  

In the last six months, Brex says it has seen a five-fold increase in the share of spend management users outside of the US, and nearly 50 per cent of customers on its Empower platform having globally distributed teams.

Wise, which has 16 million customers globally, just two months ago also revealed plans to bolster its international expansion with China and India both in its sights. 

A dose of reality

Fintech valuations have been hit hard in the past 12 months but the opportunity is still not only vast but growing at an impressive pace despite the correction. 

A report out this week jointly authored by Boston Consulting Group and QED Investors, a major fintech investor, projects a five-fold growth in fintech revenues over the next six years or so to $1.5trn annually by 2030.

Another key takeaway, not widely reported unlike the headline-grabbing $1.5trn figure, was the rise of multinational fintechs. 

The report notes that few fintechs have managed to successfully build a multinational business. 

This status quo, however, “is poised to change” for areas such as KYC/AML (Anti-Money Laundering), cross-border payments, wealthtech, and more.

“This is especially true for fintechs in the B2B2X space, a nascent but expanding business model in which multiple businesses combine to blend their expertise and savoir faire to construct products and services aimed at a targeted customer base,” the report says. 

“Multinational fintechs will likely evolve across countries that possess similar economic profiles and consumer needs. Typically, a J curve is encountered when trying to enter a new geography, as a similar consumer base means less need to tailor products to a new customer base or to learn local customer-acquisition methods,” it said.