Scaling a fintech abroad: Five key considerations for successful expansion

Internationalisation and expansion into wider markets is a critical part of the growth strategy for all multinationals, and fintechs are no exception to this. Leveraging extensive experience in supporting businesses to grow abroad, Chloé Wade, VP of International Financial Services UK at IDA Ireland explores five essential steps that fintechs should consider when scaling their operations and planning for international expansion.

Fintechs – financial technology companies offering financial services solutions by leveraging innovative technologies – first came to prominence around 2010 and were primarily operating in the payments space. They were initially perceived as being a threat to the established financial services sector but are now recognised as important players in this space having helped increase efficiency, cost and competitiveness within the market.

By 2020, fintechs were raising record levels of capital, with venture funding growing from $19.4 billion in 2015 to $33.3 billion. By 2021, one in two customers had used a fintech product, mainly for services such as peer-to-peer payment products, cross border payments, e-wallet services, and remittances.

Over the past two decades, we have seen the rise of multiple fintechs that have become household names in international markets – for instance leading UK firms, Boku, Revolut, myPOS, Navro, TrueLayer, Trust Payments, and Paysend have all become established players in Ireland.

This is an increasingly popular route for fintechs as they mature and continue to grow, broadening their offerings at home and abroad. What are five key considerations that each fintech should be aware of before embarking on an international expansion journey?

1. Timing

A crucial aspect of due diligence for international expansion is knowing when the time is right to take the next step and expand your footprint. A balance must be struck between understanding when the company is robust enough to begin planning for international expansion and resilient enough to endure any uncertainties ahead. As they will likely have no existing market share in that new market, they must go about navigating consumer trends, established competitors and lack of brand and reputation.

Like any other company, to determine the timing for expansion, fintechs must conduct internal analysis of financial health, operational stability, and resourcing, ensuring the established existing business is performing well and protected. An undercooked expansion can strain resources, reduce focus and damage credibility. However, if the timing is appropriate, fintechs can grow rapidly and establish a strong market share and brand awareness in new markets.

2. Location, location, location

When it comes to picking the correct location for either initial expansion beyond the home market or for the next phase of international expansion, it is important to remember each market presents unique opportunities and risks, consumer behaviours, cultural nuances, and competitive landscapes. Identifying and being mindful of these considerations is paramount to this success.

Choosing a location to seek regulatory approval is an important aspect of planning for international expansion. Regulatory authorisation is a major consideration for all financial services firms, not just fintechs.

Firms looking to establish in new jurisdictions where existing regulatory authorisations do not provide the ability to operate must seek regulatory authorisation in the jurisdiction. For example, UK firms looking at expanding into the EU require licencing in an EU jurisdiction.

For fintechs, the main regulatory authorisations sought are for Electronic Money Institutions (EMI) and Payment Institutions (PI). Registration of Virtual Asset Service Providers (VASP) has also been a large feature of the regulatory landscape for many fintechs and, more broadly, for the financial services sector.

Understanding the cultural nuances and operating environment of each market is also important in location strategy and it is necessary to examine this before entering a new market to understand consumer cultures and behaviour, marketing approach and how the sector is performing there.

For example, UK firms that have established a presence in Ireland experience similar cultural and consumer behaviours, a pro-business environment and openness to FDI and has made Ireland a location of choice for many fintechs and financial services firms.

Finally, a very important consideration in location strategy for international expansion is ensuring the availability of skilled talent, ability to hire locally and potential to build talent pipelines.

The presence of universities and higher education institutions, combined with strong industry-academia collaboration and the support of the government are all important in the location strategy due diligence.

Ireland has been very successful in growing a highly skilled and well-trained workforce and is an attractive location for candidates from other jurisdictions to relocate for work opportunities while also offering a good standard and quality of living. 

3. Developing a go-to-market strategy

Fintechs, like all companies looking to succeed in new markets, should ensure the go-to-market strategy is tailored to the new operating environment. It is also important to be aware of the local bodies and organisations in that jurisdiction who can offer support when the company is looking at scaling and growing its international business.

Companies considering functions or activity from EU expansion, RD&I, operations and multilingual, or opportunities to carry out activity to support the overall group at a wider level, may likely consider Ireland as a location of choice. IDA Ireland – the Irish Government agency responsible for foreign direct investment (FDI) – is the first point of contact for this.

Particularly in the financial services, fintech and tech sectors, there is a large scale established footprint of multinationals such as Stripe, Mastercard, Barclays, Aon, Zodia, R3, HSBC, Paymentsense (Dojo), Quantexa, Vodafone, Google, and Meta among many others who have grown significant multi-function operations in Ireland such as regulatory, innovation, tech centres, operations and multilingual to name a few.

Fintechs looking to develop a successful go-to-market strategy should look closely at those who have successfully scaled in a location under consideration as this will provide valuable insights. For example, when looking at a go-to-market strategy in Ireland and using it as a base to land and expand in Europe, companies such as Paysafe, Corepay, and Global Payments show the breadth of what can be achieved in establishing operations there.

Fintechs are often seen as ‘the new kids on the block’ and are entering a market with not only other fintechs for competition but are also competing with large and well-established incumbents who have an existing and typically large market share.

As fintechs are relatively young companies looking to grow, it is important they understand the competitor dynamics and how best to position themselves to succeed in a new market.  

4. Local leadership and company culture

Establishing a strong leadership team on the ground is key to success. Hiring an experienced site lead and management team with good connections and strong knowledge of a market can help companies to hit the ground running, recruit good candidates, grow company culture and establish the company within the local ecosystem to help drive growth, brand and market share.

Strong leadership teams often have working experience of multinationals during growth stages and can bring a wealth of knowledge in areas of expansion and growth. Ireland has been a successful location of choice for fintechs, particularly from UK and US, who initially established regulatory hubs and smaller operations which allowed them to operate in the EU post-Brexit.

The success of these operations has given confidence in the activity that can be carried out there and many of these companies have established EU/EMEA headquarters in Ireland and located high value add functions such as technology development and innovation centres there.

5. Long-term growth, headwinds, and  pitfalls

When entering a new market, it is best to plan for the longer-term when it comes to growth by setting realistic expectations – because growth is gradual and has its ups and downs along the way.

The challenges of regulatory authorisation in new jurisdictions, competing for market share, hiring a team and considering how that new operation can be leveraged for further internationalisation brings with it many complications and risks, as well as many opportunities and possibilities.

Strong marketing strategies and well-tailored offerings to the market are imperative. It is also important to ensure the business is robust enough to withstand tougher days and can manage unexpected headwinds.

Being mindful of the risks as well as the rewards with international expansion is necessary in planning and decision making and will help leadership teams to navigate the process of internationalisation and expansion. This will ensure the business is more resilient in the longer term.