Expansion Of Fintech Market Size Through Partnerships
Expansion Of Fintech Market Size Through Partnerships
Fintech companies, like any other business, aspire to expand beyond their initial location. For instance, a startup that began in Nigeria may desire to expand into other countries within a few years, provided they have the opportunity. Recent examples include Lidya, Paga, and Migo.
When we examine how expansion occurs, a recurring theme emerges:
Since the realities of running a Fintech business vary by country, it is frequently impossible to set up shop in a new country with no assistance. Business registration, licensing, account opening, taxation, and data protection requirements, among others, can make the expansion process difficult and discouraging.
As a result, it's unsurprising that Fintech’s engage in various partnerships to address this issue. Consider Cellulant.
The Fintech company has expanded from a single office in Kenya in 2004 to 33 African markets. However, Sike Bamisebi, acting CEO of Cellulant Nigeria, reports that the company is only registered in 18 countries. They partner with some competitors that are already stabilized to deliver the value they offer in other markets.
Collaboration As Another Type Of Partnership
Collaboration with competitors is another type of partnership, as Bamisebi explained. The other two possibilities are partnerships with companies that specialize in specific industries or with providers of segmented infrastructure.
Bamisebi believes that Fintech company must first have a compelling reason for partnering, a sentiment shared by Nosa Omusi, Catalyst Fund's Nigeria country manager.
Omusi explained that partnerships could be formed for a variety of reasons. Typically, a business seeks out partnerships to scale customer acquisition.
However, a business may enter into a partnership to bolster trust in its services. Companies must ensure that such alliances are founded on strategic alignment between the parties involved.
“Your ideal partners are those whose strategic objectives coincide with yours. If you want to form a partnership, you must first determine which organizations' value propositions make the most sense,” Omusi explained.
Other factors, such as ensuring the value proposition is clear, concise, and quantifiable, come into play with this set. Because Fintech partnerships typically require some level of technology integration, an audit of the prospective partner's level of digitalization is also necessary. Additionally, where revenue sharing is involved, terms must be clearly defined and agreed upon without coercion or reluctance.
One thing to know is that there is no one-size-fits-all approach to Fintech partnerships, as Clara Odero, NIUM's VP of Partnerships and Growth for the Middle East and Africa, observes: "Markets are extremely diverse." If you come from a cash-based economy such as Nigeria, operating in Rwanda's mobile money ecosystem is an entirely different experience. Infrastructure is distinct. How you acquire merchants will be unique."
In other words, conducting thorough research and gaining a firm grasp on how Fintech operates in a new location are indispensable.
Bamisebi notes that it may be tempting to overlook cultural and linguistic differences play startup expansion across Africa. In reality, navigating from a francophone to an anglophone region entails more than meets the eye.
The big elephant in the room for expansions and partnerships deals with regulatory differences. Should businesses disregard permissions and then seek forgiveness?
While this is certainly possible, Odero advises, "please seek permission."
“Seeking forgiveness is a wonderful thing to do when you have a great lawyer on call to get you out of sticky situations. However, engaging in early conversations with regulators familiarizes them with your business model".
She claims that she has dealt with various regulators in her job and has yet to meet one who is unwilling to engage in conversation.
And should Fintech startups be aggressive in their expansion plans?
Bamisebi believes that an aggressive or gradual approach is appropriate "depending on your risk tolerance as a founder." However, she thinks that a thorough understanding of the market is critical."
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