FinTech, a term that has garnered worldwide recognition, refers to a rapidly growing industry that facilitates saving, investing, borrowing, and transferring funds by enhancing these traditional financing methods in the context of a virtual environment. According to Statista, in 2021 alone, the world saw a total of 26,346 fintech startups. In this aggressively expanding yet increasingly competitive industry, global expansion is a natural next step for those startups seeking to increase their market share by replicating local success globally.
A global expansion inherently requires investment from a business, and its success is dependent on a multitude of factors, including the business’ compatibility with local regulations, product receptiveness by local clients, brand awareness in the local market, and resilience to risks. In expanding, a fintech startup should be prepared to evaluate these factors to make well-informed business decisions, leading to maximized returns and mitigated risks.
Here, we offer 4 pieces of advice to fintech companies looking to extend their business outreach.
Know the Local Regulations
The financial services industry is one of the most heavily regulated industries, given its prominence in setting the foundation for a fair and efficient market. However, fintech companies are often subject to a different set of regulations in comparison to those faced by traditional banks. In many countries, local anti-money-laundering practices, data privacy protection plans, securities trading rules, tax policies, and labor laws impose different regulations to various extents. In some countries and in particular niches, fintech companies flourish in the absence of regulations; while in others, they are heavily constrained.
For example, in the United States, no single federal or state authority has developed a fintech-specific regulatory framework. Rather, a fintech company’s operations may be subject to a broad range of licensing or registration requirements, as well as federal and state laws such as the Bank Secrecy Act (BSA) and anti-money laundering (AML) laws.
The same company may also be subject to the scrutiny of one or more of the following regulatory institutions:
- Financial Crimes Enforcement Network (FinCEN)
- Office of the Comptroller of the Currency (OCC)
- Consumer Financial Protection Bureau (CFPB)
- U.S. Securities and Exchange Commission (SEC)
- Federal Trade Commission (FTC)
Expanding the business in compliance with local regulations will not only prevent hefty fines and monetary losses, but also help mitigate any reputational and compliance risks. Thus, learning the local regulations, and seeking advice from a local consultant may be a worthwhile investment to equip the business with sufficient knowledge to make more soundly based decisions.
Localizing the Product Linguistically
A global survey by CSA Research shows that 76% of consumers prefer purchasing products with information in their own language. When it comes to managing wealth, this preference is even more evident. Fintech companies aiming to grow internationally face the challenge of adapting their product both linguistically and culturally.
As opposed to traditional financial services, where the US and Europe typically represent the most profitable markets, some sectors of Fintech see the most potential in developing nations. To demonstrate this point, more than 200 million people in Southeast Asia do not have a traditional bank account. These markets are typically more receptive to the idea of Fintech compared to those markets where traditional banking has a tighter grip – China alone has a huge 69% fintech adoption rate, demonstrating that the services fintech can offer are highly desired locally.
Reviewing these target markets, the local receptiveness of products presented in English language is comparatively lower, thus further increasing the necessity for a complete cultural and linguistic adaptation of the product or services. The consumers in these markets expect fully localized products that are precisely and consistently presented in their native languages.
To help Fintech companies overcome their language barriers, Fintech-focused language service providers can help ensure the accuracy and consistency of the translation, with stringent quality assurance so that the end-user experience is upheld to the same standards. To achieve this goal, the language service provider must not only have a high level of expertise in the respective languages, but also demonstrate advanced knowledge in the subject matter of the fintech product. Fully localizing the products also requires the technical know-how for managing linguistic assets, building of connectors, and optimizing both cost and workflows.
Partnering with Local Banks
According to a BIS survey, in countries where traditional banking has a strong presence, consumers trust banks more than fintech products to secure their data and funds. In these local markets where traditional banking symbolizes security and stability, Fintech’s best path to success is to partner with local banks.
For most Fintech companies, a digital wallet or virtual account management represents the most popular type of partnership with consumer banks. In such cases, a fintech company often leases its program or platform to a bank, under a software as a service (SaaS) model. In this way, a fintech company leverages an existing client pool without the need for an upfront investment in marketing or client acquisition.
When done well, this partnership will not only provide the initial income stream for the fintech business, but also help build its market presence and credibility among local consumers. For example, the partnership between Bank of Montreal and Blend quickly propelled the digital mortgage and home equity solutions to the local markets, whereas the partnership between Cross River Bank and Affirm reflected a rise in popularity and acceptance of paying for online shopping in installments.
Mitigating Cyber Risks
According to the 2021 Mid-Year Data Breach Quick View Report, the finance industry ranks second in terms of data breaches. Equipped with international platforms and servers, global fintech companies are likely targets for potential cyber-attacks. Therefore, a globally expanding fintech company must be prepared to reinforce its cybersecurity infrastructure and procedures.
Negligence in cybersecurity can result in serious monetary loss and reputational risks. Equifax, a credit reporting agency, revealed a devastating data breach in 2017, exposing the personal information of 147 million people. Equifax had since spent more than one billion dollars to improve its cybersecurity.
In essence, a fintech company is ready to expand globally when it has:
- Evaluated its business’ compatibility with local regulations
- Adapted its product for local clients both linguistically and culturally
- Planned for building brand awareness in the local market, and
- Anticipated risks in areas such as cybersecurity.
In this age of technology, the immense potential within fintech is undisputable. The Fintech market, expecting to reach $324 billion by 2026 (Market Data Forecast), provides an environment for rapid global expansion, but at the same time requires expertise in a multitude of fields that fintech startups must be prepared to equip quickly and effectively.
EC Innovations offers Fintech localization / translation services in over 130 languages. Our subject matter experts have the experience and knowledge to ensure that your regulatory documents meet the most stringent regulatory requirements. Our linguists have in-industry experience to understand your products on a fundamental level. At EC Innovations, we invest in protecting our clients’ data and we are one of the few language service providers with ISO 27001 accreditation. If your company is in need of any assistance localizing your product in your global expansion plan, please feel free to contact us.