Where in the World Is My Next Fintech Opportunity?

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    A global framework for mapping digital payment maturity

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    Lindsay Lehr

    Managing Director

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    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.

    Phase 1: 50% Smartphone Adoption

    This is the turning point. Before this stage, not enough citizens are connected to mobile internet to incentivize investment by banks and fintechs. But at 50% penetration levels, there is critical mass to begin deploying mobile financial services and generate reasonable adoption.

    Phase 2: 65% Financial Account Penetration

    *Financial account* covers both banks and fintechs. Prior to 65% penetration levels, there is not adoption of financial services to begin displacing cash, even if smartphone penetration is high. Yet, when reaches 60%-70%, there is sufficient critical mass to see consolidation of digital payments across diverse use cases—P2P, mobile top ups, bill pay, transportation, purchases, e-commerce—that cash begins to lose its stronghold. At this level, fintech adoption is a slippery-slope forward.

    Phase 3: 80% Financial Account Penetration

    This is where the fun begins. At this point, penetration of financial services is nearly universal, and barriers to access have been all but removed (save rural locations, some low-income segments and informal merchants). Cash is actively being displaced and digital financial connectivity is robust enough to accelerate innovations like Open Finance, BaaS, payment initiation, tokenized wallets, embedded finance, and others. The industry is becoming increasingly competitive, UX is everything, and merchants, platforms, and marketplaces are vying to compete in financial services.

    Phase 4: 50% Credit Card Penetration

    At this stage, all of the above criteria are fulfilled and a significant portion of the population has easy access to credit. This represents a mature market, where fintech innovations are plentiful across the board—in payments, shopping, lending, wealth management, insurance, etc., it becomes more difficult to compete beyond price, and consumers are highly selective, if not down right entitled.

    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.

    Next Steps

    Contact us to find out how we can help your company achieve its strategic goals with the data and insights necessary to discover opportunities, find local partners, launch or develop products, and much more.

    PCMI specializes in global payments market research and intelligence for Asia (including China, India, Indonesia, Japan, Singapore, Malaysia, Philippines, Australia, and more), Europe (UK, Spain, Portugal, France, Italy, Germany, Poland, Sweden, Turkey, and more), Africa (Egypt, Morocco, Kenya, Nigeria, Ivory Coast, Ghana, and South Africa), and of course, Latin America and the Caribbean (LAC), a market for which which we have produced hundreds of payments market studies in just about every country.


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    Lindsay Lehr
    Lindsay Lehr
    lindsay@paymentscmi.com

    Lindsay Lehr is the Co-Founder and Managing Director of PCMI. With 15 years’ experience, Lindsay is specialized in the region of Latin America, executing over 400 consulting engagements for Fortune 500 clients in the region.