Where in the World Is My Next Fintech Opportunity?

A global framework for mapping digital payment maturity

Lindsay Lehr

Managing Director

Since 2012, PCMI has watched intently as Latin America evolved from a cash-dominant, low-tech, almost provincial region to a fiery, mobile-enabled fintech cauldron, fully mobile-enabled and where cash is no longer in the front seat. Today, Latin America is driving the global adoption of RTPs, is home to world’s largest neobank, and is the second-fastest growing fintech market.

The region’s digital payment adoption is disparate, ranging from global leader Brazil to still-sleepy markets like Ecuador and Bolivia. In these 13 years of observation, PCMI has analyzed these 20+ markets nearly to death, helping us understand when and how digital payments take off.

Every region in the world is going through a similar transformation, at different stages. The US and Europe are ahead of Latin America, most of Africa is behind it, and APAC is a mixed bag. But these regions are massive, most much larger than Latin America, even more complex and diverse. Where will fintech strike next? As we approach increasingly advanced levels of fintech innovation, where are the new opportunities? What stage are world markets in and what does that mean for a digital payment strategy?

We’ve developed a few benchmarks that can help.

How Do These Stages Map Globally?

Using the 2021 World Bank Findex, combined with our own analysis, PCMI has mapped these phases across the global, helping global financial service providers to understand where to go next, and how. When considering the global context, some key facts to consider include:

• 36% of the worlds’ population lives in Phase 1 countries, with 50% smartphone penetration but less than 65% account penetration. Most of these markets are in Africa, where there is massive opportunity for basic digital financial services, cash-based digital solutions, and services designed for low-income consumers. Other markets of note include Mexico and Indonesia, huge countries of over 100 million inhabitants—treasure troves for innovators with a pulse on the local market.

• 18% of the world’s population lives in countries in Phase 2. In these markets, basic digital payment habits have been established and are maturing. Here, a strong user experience combined with security and trust are essential for the continued momentum toward digital maturity. In Phase 2 we see countries like Uganda, Argentina, Colombia, and Turkey—emerging markets with huge promise but that still experience structural inefficiencies, lack of trust, and informality that hold them back.

• The largest group of world citizens, 38%, lives in Phase 3 countries, which is the phase most ripe for innovation and new business models. These countries are in the midst of embracing new technologies such as real-time payments, Open Finance, BNPL, tokenization, CBDCs, and experimentation with blockchain, among others. In these markets, competition is fierce, but so is the potential reward for prevailing innovators. Most notable are Brazil, Sweden, China, and Singapore, both large and small markets leading the world in payments innovation and rapid market change.

• 9% of the world lives in Phase 4 markets, which are matured to the extent that at least 50% of the population has easy access in the form of a credit card. This group is diverse: they can be characterized by legacy payment and banking systems that are difficult to disrupt, and in which innovations are market-led, (i.e. the US) as well as markets where regulators play a heavy hand in modernizing payments (i.e. the UK). Here, because of a mature population, fintechs and other players have large opportunity to innovate in the most progressive industry verticals, like Web3, blockchain, embedded finance, and B2B payments. Yet, they face the challenge of clunky, massive legacy systems and deeply engrained habits among the population.

This framework helps fintechs, networks and banks understand the evolution of digital payments at the global scale and prioritize. A key highlight is that while massive progress has been made in the last ten years, over 50% of the world still live in markets with <65% penetration of financial accounts. This means that many of the playbooks that have been successful in Latin America and Asia can be successful (albeit with local adjustments) in Africa, the Middle East, Eastern Europe and key markets in Latin America and Asia. Phase 3 markets will continue to disrupt payments as we know it around the world, marking the future for Phase 1 and Phase 2.