How to leverage global diversity to achieve fintech success
Remote employment has led to significant changes in the structure of how we work, where we work and with whom we work. This gives fintechs an opportunity to diversify their workforce beyond local borders while strengthening their business.
Emerging markets now offer the greatest growth opportunity for fintechs. For example, in Southeast Asia – where over 70% of consumers remain unbanked or underbanked – fintech revenues are projected to grow to USD 38 billion by 2025, more than tripling 2019 values. However, many fintechs have struggled to operate effectively in these vital regions.
The most successful fintechs are disruptors. They solve complicated problems with simple solutions and a good user experience. But to solve a problem you need to understand its roots. And in emerging markets, these roots extend to local soil that may be unfamiliar to fintech leaders coming from developed markets such as the US or the UK.
“Presence on the ground provides invaluable knowledge”
To succeed in emerging markets, fintechs must recruit employees who reflect the communities they wish to serve. A presence on the ground can provide invaluable knowledge, context and local relationships to navigate complex business environments in a way that a team from another country never could.
I know this because I have given that presence on the ground. I am not only a leader in Euronet’s money transfer segment – I am also a customer. I was born in Latin America, have since lived in four countries, and have experienced firsthand the barriers the world sets up for moving money across national borders. When sending money abroad, I have been frustrated by confusing instructions across different languages and banking systems. I understand the importance of offering one, simplified experience for paying customers because I have experienced the challenges myself.
The customer’s needs can vary significantly from country to country. For example, recipients around the world have different preferred payment methods. Of the cross-border payments sent to Mexico that are ordered via online channels on the Dandelion payment network, 67% of payments are cash pickup, compared to 4% of payments sent to India. Companies need local teams in emerging markets that recognize these types of nuances in customer behavior, can understand local regulations and can build relationships with local financial institutions.
Having this kind of distributed workforce, with employees who have similar experiences to me, has given us the competitive edge to build Dandelion – the largest real-time cross-border payments network in the world. We operate in more than 180 countries, and 40% of our workforce is in emerging markets.
A growing need for fintechs to diversify
Other fintechs can, and should, exploit the same opportunities we have. Their economic growth may depend on it.
Over the past few years, an influx of venture capital has fueled a fintech boom in developed markets. Fintech VC funding peaked at $115 billion in H2 2021. Now fintechs are maturing and have an established core business to defend, but they also face new challenges.
Between inflation and the big resignation, labor costs are growing, leading to reduced margins and increased operating costs. At the same time, investors are becoming more demanding and selective about who they finance. Fintech startup funding fell 33% quarter over quarter in Q2 2022, and the valuation of publicly traded fintech companies fell by half a trillion dollars in 2022 so far. Investors now expect more than revenue growth: they want to see profits. These pressures, plus the threat of economic downturn, are driving the need for fintechs to diversify their businesses.
Expansion into emerging markets is an obvious solution. These regions have continued to see strong economic growth even in the face of a looming recession in the US and elsewhere. India, for example, is projected to be the fastest growing world economy by 2022.
Take your workforce global and reap the benefits
Fintechs that are already embracing this opportunity are seeing the results. During the first year of the covid-19 pandemic, fintechs specializing in digital asset exchange, payments and savings grew by 13% on average, with those in emerging markets experiencing the fastest growth (21-40%).
However, you must proceed with caution. In the past, fintechs have experienced exceptional growth by running a lean, agile business. But their inexperience and disconnection from emerging markets is a disadvantage because they are not exposed to local nuances.
Expansion into emerging markets is a huge opportunity for fintechs. Many factors are driving this shift, including remote work, increased VC funding and fierce competition in the market. But without a local presence in the communities they aim to serve, too many will fail to benefit. Now is an ideal time to take your workforce international – and take advantage of all the benefits that come with it.
