How to leverage global diversity to achieve fintech success

Remote employment has driven significant changes to the fabric of how we work, where we work, and who we work with. This presents an opportunity for fintechs to diversify their workforces beyond local borders and bolster their businesses at the same time.

Emerging markets now offer the greatest growth opportunity for fintechs. For example, in Southeast Asia – where over 70% of consumers are still unbanked or underbanked – fintech revenues are projected to grow to US$38bn by 2025, more than triple 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 great user experience. However, to solve a problem you must understand its roots. And in emerging markets, those roots extend into local soil that may be unfamiliar to fintech leaders who hail from developed markets like the US or UK.

'On-the-ground presence provides invaluable knowledge'

To succeed in emerging markets, fintechs must recruit employees who reflect the communities they want to serve. An on-the-ground presence 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 provided that on-the-ground presence. I’m not just a leader in Euronet’s money transfer segment – I’m a customer, too. I was born in Latin America, have since lived in four countries, and have experienced first-hand the barriers the world puts on moving money across borders. When sending money abroad, I’ve been frustrated by confusing instructions across different languages and banking systems. I understand the importance of providing one, simplified experience for payments customers because I’ve experienced the challenges myself.

Customer needs can vary significantly from country to country. For example, recipients around the world have varying preferred payout methods. Of the cross-border payments sent to Mexico that are booked through online channels on the Dandelion payments network, 67% of payouts are cash pickup, compared to 4% of payments sent to India. Companies need local teams in emerging markets that recognise these types of nuances in customer behaviour, can understand local regulations and can build relationships with local financial institutions.

Having this kind of distributed workforce, with employees who have experiences similar to mine, has given us the competitive advantage to build Dandelion – the largest real-time cross-border payments network in the world. We have operations 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, harness the same opportunities we have. Their financial growth may depend on it.

In the past few years, an influx of venture capital has driven a fintech boom in developed markets. VC funding for fintechs peaked at US$115bn in H2 2021. Now, fintechs are maturing and have an established core business to defend, but they’re also facing new challenges.

Between inflation and the Great Resignation, labour costs are growing, leading to reduced margins and increased operating costs. At the same time, investors are becoming more demanding and selective about who to fund. Startup funding for fintechs dropped 33% quarter over quarter in Q2 2022, and the valuations of listed fintech companies fell by half a trillion dollars in 2022 so far. Investors now expect more than revenue growth: they want to see profit. These pressures, plus the threat of economic downturn, is driving the need for fintechs to diversify their businesses.

Expansion to 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 in 2022.

Take your workforce global and reap the benefits

Fintechs already embracing this opportunity are seeing the results. During the first year of the COVID-19 pandemic, fintechs specialising in digital asset exchanges, payments and savings grew 13% on average, with those in emerging markets seeing the fastest growth (21-40%).

However, you must proceed carefully. 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 to emerging markets is an enormous 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 take advantage of it. Now is an ideal time to take your workforce international – and harness all the benefits that come with it.

About the author

Cecilia Tamez is the Chief Strategy Officer for Dandelion, a Euronet service. Today, Dandelion is the largest cross-border payments network in the world, enabling payments to 190+ countries and territories across 4bn+ bank accounts and mobile wallets, as well as 500k+ cash pickup locations. Tamez was the fifth employee at Xe and supported the growth of the company through its acquisition by Euronet in 2015. She is an industry leader in cross-border payments with a special focus on emerging markets and data science innovation. With nearly 20 years of experience in the industry, Tamez is passionate about closing the payments innovation gap between developed and emerging markets. She is a strong advocate for modernising legacy payment rails to deliver real-time cross-border payments that connect individuals, businesses and banks in every corner of the world.