Why localisation is the key to unlocking long-term growth in Fintech

Richard Wray, Chief Operations Officer at Carta Worldwide 

Originally published in the IBSIntelligence December journal.

All over the world, commerce ecosystems are rapidly maturing, encouraging payments to become more digital, instant and seamless. But there are many branches of the payment evolutionary tree, each one shaped by consumer attitudes and new standards that are diverse from country to country. 

In Asia, for example, the versatility of super apps has become so deeply ingrained in these parts of the world that it’s unthinkable for Asian consumers not to use them for most transactions. In South America, the explosive growth of the internet, and a pandemic reckoning finally gave digital-first payment solutions the lead of cash. And Islamic finance principles continue to guide millions of followers around the world in how they bank and transact with even non-Muslim majority countries like the UK providing Islamic finance products a level playing field in conventional finance. 

This means a blanket approach to payment solutions can never work. If brands want to create a truly attractive payment experience and carve out a larger market share for themselves, they’ll have to understand these differences and implement strategies that adapt to regional nuances. Here’s how. 

No interest in interest

Most companies do an OK job at scaling, finding most of their success by winning some business in their home markets before fundraising for expansion and aiming to take on the world. Their first forays abroad are often into markets that feel similar to their own in language, culture or standards. Those are safer bets, but when they start going outside of those, understanding cultural nuances begins to play a huge role in how successful they’ll be. 

In each market, there may be cultural differences in attitudes towards money and their impact on financial behaviours that brands should look out for. In countries where the practice of Islam is common for instance, the moral principles of Shariah play an important role in banking in finance. 

How it differs from other types of finance is the belief that money shouldn’t have any value in itself. It’s just a way to exchange products and services that do have value. This means that wherever possible, getting involved in interest by either paying or receiving it should be avoided. It’s for that reason, traditional credit is not always seen as socially accepted by the religion. Instead, Shariah-compliant credit cards offer similar perks and benefits as their conventional counterparts, but interest is not paid and overcharging is not permitted on Islamic accounts. 

Another important idea that underpins Islamic finance is that it shouldn’t cause harm. As a result, Islamic financial services like shariah-compliant cards cannot be used to purchase things like alcohol, tobacco, and gambling. 

These principles don’t stop consumers from having credit cards and loans, but it creates a lot of discretion around how credit is extended and obtained if it doesn’t comply with Shariah. For any fintech wanting to expand into countries where Islamic finance is common, they have to be aware of the implication it may have on scaling, adapting their existing non-compliant product and ensure that their business model is still viable. 

Will you meet the standard?

The other important element for successful international expansion is understanding the standards already in place and your ability to meet them. 

Regulation and compliance should be one of the largest considerations for a scaling fintech because you can’t operate in a country without abiding by its payment rules. This can cover a broad range of rules from Know Your Customer (KYC) requirements to data privacy rules for your customers. Fortunately, chances are that many fintechs may already be on the way to meeting quite a few of the compliance related requirements simply by having established a compliant programme in their home country and have the experience to do so again in other parts of the world.  

For example, many of the EU’s data protection requirements are met by the Payment Card Industry Data Security Standard (PCI DSS). PCI DSS is a global industry led standard that mandates all companies that handle branded credit cards ensure the security of card transactions and card data. It means that fintechs globally around the world that already adhere to the standard will find it easier to scale into Europe. 

They’ll still need to research the requirements for the market they are hoping to enter and assess how far away that is from the compliance standards they are already meeting. The EU Digital Operational Resilience Act, for instance, is currently being considered by the EU parliament. When passed it will set a new global standard in data security and contain stronger requirements for financial institutions to safeguard against ICT risks. Undoubtedly fintechs will need to do some work to comply with these new rules, but they’ll still save valuable time by scaling into countries with similar standards 

The localisation playbook

Every market is different but not entirely dissimilar. Each requires circumnavigating different consumer preferences and standards, but businesses don’t have to reinvent the wheel in every market they go to. Instead, every successful example of localisation starts with a technology stack that is adaptable enough to tailor their offerings and takes a modular approach to scaling. One that can plug in whatever rails or infrastructure businesses need as and when they need them. 

And it’s in the tailoring where payment partners provide the greatest value. Partners that are global in scale but local in expertise, are best placed to help businesses cut through the complexity and connect to the various payment schemes, local partnerships and tools businesses need to adapt proven solutions to new markets. And a good payment partner is a safe pair of hands and a buttress for organisational resilience. They’ll help manage complexity and risk, anticipating emerging concerns and give fintechs payment solutions with compliance baked in. Pieced together thoughtfully, businesses can better engage with customers, achieve compliance and conquer any new market.