Fintech’s international expansion is getting interesting

Faced with deep uncertainty during the pandemic, fintechs dropped their expansion plans. Now that tide is turning.

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

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

For example, Monzo’s original pitch deck included a slide that said the startup was building “a bank for a billion people”.

Nevertheless, international expansion – as it turns out – is difficult.

Scaling a business in one market is tough enough, but several geographical fronts are almost an impossible task.

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

Faced with deep uncertainty, companies largely dropped their expansion plans – or at least put them on hold – and concentrated on their core customers and revenue strategies as investors began to demand an acceleration to profitability.

Now it seems that international expansion is back.

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

“Brazil is an exciting market for Revolut and has huge 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 spend their money efficiently. We are starting 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 operations internationally this week

In the past six months, Brex says it has seen a fivefold increase in the share of spend management users outside the US, and nearly 50 percent of customers on the Empower platform have globally distributed teams.

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

A dose of reality

Fintech valuations have been hit hard over the past 12 months, but the opportunity remains not only large, but growing at an impressive pace despite the correction.

A report published this week jointly authored by Boston Consulting Group and QED Investors, a major fintech investor, projects a fivefold increase in fintech revenue over the next six years or so to $1.5 billion annually by 2030.

Another key takeaway, not widely reported in contrast to the headline-grabbing $1.5 billion figure, was the rise of multinational fintechs.

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

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

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

“Multinational fintechs are likely to develop across countries that have similar economic profiles and consumer needs. Typically, one encounters a J-curve when trying to enter a new geography, as a similar consumer base means less need to tailor products to a new customer base or learning local customer acquisition methods, it says.