How to take your fintech business global
For many South African fintechs, their ambitions are far greater than the domestic market. Luckily, South Africa’s financial services system is the most advanced in Africa, with first world infrastructure that resembles that found in developed markets. Solutions developed here are therefore highly relevant to developed markets, which is why we’ve seen some of our fintech entrepreneurs successfully penetrating international markets.
Start with the end in mind
South Africa is a small market by global standards which can mean limited opportunities for fintech entrepreneurs. To become a global leader though, you have to start knowing where you want to end up.
For Entersekt, a developer of next-generation authentification and mobile app security, going global was on the agenda from day one.
“We understood, right from the beginning, that we needed to become the global standard or someone else would do so and displace us”, says CEO Schalk Nolte. These global ambitions have seen the firm grow faster in Europe and the US than in the rest of Africa. Bitcoin and ethereum company Luno, and data analytics firm Emerge Analytics, both built their global aspirations into their mission statements. This is a good way to infuse these ambitions into company culture and ensure everyone is focused on the same global goals.
Conquer your home market first
Your home market is usually the best place to cut your teeth. You know first-hand what the real problems are that need solving, the regulatory environment is familiar and your network is likely to provide the greatest level of support and skills from which to draw. According to Nolte, it could be worthwhile to extend your home market into the rest of Africa.
“Africa is home to a billion people, and South Africa is uniquely positioned in being able to enter a market that overseas competitors often undervalue or are hesitant to enter”, he says.
By the same token, expanding into other emerging markets can be a helpful step before tackling developed markets. This is what Luno did. Marcus Swanepoel, co-founder and CEO, explains: “Initially we targeted emerging markets because we felt we had a lot of emerging market experience given our South African roots. We launched in South East Asia (including one of our key strategic hubs in Singapore) and Nigeria. Later on we expanded into more developed markets including Europe.” However, your business should be ready to expand. “What you don’t want is to rush going global and end up as two separate start-ups in different territories, fighting for resources and struggling to align strategically”, says Nolte.
Understand your target market
- Build relationships
Once you’re confident on your timing, ensure you understand the intricacies of your target market. Co-founder of Emerge Analytics, Laurence Rau’s advice is to try establish key partnerships in the geographies you are interested in going to. This will help you get to grips with the subtle differences between your targeted international market and your home market.
“For example, short-term insurance is sold as an annual policy in most countries, unlike in South Africa where it is sold as a monthly policy. This made a big difference to how we positioned our project to the international market”, he says.
Relationship building has also been key to the global success of Luno.
“Our dedicated country teams are focused on building collaborative relationships with local regulators, governing bodies and financial institutions, and cross-sharing best-practice and expertise”, says Swanepoel.
- Know the regulatory requirements
Relationships with regulators will be helpful in navigating a regulatory environment that is likely to be different to your home market. Financial services regulations are becoming more onerous on a global basis and you must be 100% comfortable that you can easily comply with them.
- Target the under-targeted
While plenty of businesses enjoy great success in highly competitive markets, servicing parts of the economy that are already well-served, there’s much to be gained from targeting the under- or un-targeted.
Prodigy Finance, for example, has made a name for itself by focusing on international students that, despite their creditworthiness, have been cast aside by banks who are unable to lend internationally. Prodigy Finance’s borderless credit system is revolutionising access to higher education for students, particularly those from emerging markets.
- Take your home language with you
Language barriers are also an important consideration. It’s easier to penetrate a market where the participants speak the same language as you do. This helps ensure that the nuances of your offering are properly portrayed. Both Nolte and Swanepoel highlight the language aspect as key to how they decided which international market to target first.
- Focus on market makers
For Nolte, another key factor is whether the targeted market is a banking market maker or not.
“We wanted to access markets in which there were banking market makers. In other words, if the leading banks in a market have subsidiaries in other territories, we’d be more likely to be able to scale internationally”, he says.
Make sure your technology is transferrable
Being able to scale is also closely related to how transferrable your technology is as Nolte explains. “Our technology solves several very real problems. This has allowed us to pitch to the problem which might be different in each market, but is solved by the same piece of technology, which allowed us to scale”, he says.
Rau, of Emerge Analytics says: “We have standardised our methodology and automated it which has enabled us to be very flexible in our approach. This has meant that we can solve almost any problem our clients come up with regardless of industry and geography”. Similarly, founder and CEO Cameron Stevens of Prodigy Finance, highlighted how they localised their code base early.
“We are able to support multiple currencies, country-specific payment methods and local languages. This has helped ensure that our products and services make it safe and easy for people and businesses the world over to buy, store, sell and learn about cryptocurrencies”, he says.
Choose your funding source carefully
Of course your ability to transfer your technology to a global audience requires funding. Access to this funding is probably one of the most important determining factors of your global success. Luckily, incubators and accelerators like AlphaCode exist to help you get off the ground. This route can be highly beneficial not least because of the extensive networks that it opens up.
“AlphaCode’s support and collaboration helps us with local business operations, sourcing talent as well as fine tuning and accelerating our growth ambitions”, says Stevens.
If you go this route though, Nolte is adamant that you must choose your investing partner wisely. “Make sure you have funders who support your long-term vision and goals, and who can give you solid advice from their own experience,” says Nolte.
“Sometimes ‘no’ is just a suggestion”
There will undoubtedly be stumbling blocks and seemingly insurmountable obstacles along the way. However, the advice from Stevens of Prodigy Finance is that you should be resilient and know when to push the boundaries.
“Sometimes, no is just a suggestion,” he says. “When we first started out, we were told by a credit lawyer: ‘Please don’t do this. This is the only advice we’re going to give you. You’re going to regret it.’”
That advice was entirely misguided. The firm now enjoys global success; it has helped more than 10, 000 students from more than 120 countries fund their education. Entersekt’s Nolte also advises that you don’t allow yourself to be disheartened if your offering is not immediately recognised or valued.
“If your technology offers a superior solution to a real problem, establish exactly who to target, and then use your network to get connected to that person. If all else fails, keep muscling your way through doors and networking until you find someone who will listen”, he says.
Focus on the right aspects
Becoming a global success in the fintech world is no mean feat but there are a number of strong examples of South African companies that have walked the path before. By focusing on the right aspects and learning from key players, you can turn the those global ambitions into reality.