The Biggest Struggles Fintech Firms Face in the North American Market
5 hurdles key and ways a strategic local advisor can help
The North American Fintech market is projected to be worth USD 212.3 billion by 2029, with a compound annual growth rate (CAGR) of 24.5%. But while the North American market has long been a hotbed of fintech innovation and deal-making, the market has its challenges, especially for fintech firms from outside of the US wanting to take advantage of the striking growth possibilities. In this article, we look at the biggest struggles fintech firms face when trying to expand into the North American market - and how a strategic local partner can help.
Regulation. The North American market is a complex regulatory environment, with fintech firms needing to navigate federal, state, and local regulations that sometimes contradict each other. Additionally, technological first movers, like those embracing the Banking-As-A-Service wave, must be wary of regulatory uncertainty where clear guidelines for these newer business models are still being established. Local advisory expertise is needed to guide Fintech firms through these regulatory hurdles, saving valuable time to market and avoiding costly fines due to non-compliance.
Positioning. The Fintech market is maturing, and with its evolution, the number of competitors with similar services has increased. Standing out means having a strong value proposition with clear differentiation. It also means building trust with often risk-averse decision-makers who place a premium on credibility. Building a brand in this new market requires intimate knowledge of the individual players, which is difficult for fintech firms outside the US to gain.
Competition. Being a standout Fintech firm in a saturating market means having detailed knowledge of your competitors. Knowing how competitors incorporate enhancements into their offerings can help Fintech firms from other regions enter the market more competitively. Understanding the pricing conventions active in the market can help Fintech firms adjust their pricing to make themselves more competitive. Lastly, looking at more qualitative factors, such as service or sales processes, may be necessary to win over customers and build credibility quickly.
Validation. A new market's customer, regulatory, and technological dynamics are significantly different for regulated industries like financial services. Fintech firms wanting to work with US banks need to test their messaging and products with "friendly" market participants. This exercise will provide much-needed feedback on the localization needs of sales and product efforts. However, accessing these "friendly" individuals can be difficult for fintech firms outside the North American market. Investing into strategic advisory projects with established market players helps new entrants gain the contacts they need to thrive.
Sales Outreach Design. Fintech firms looking to partner, white-label, or license their solution to financial institutions may find selling to the North American market challenging. Complex organizational structures and gatekeepers make connecting with the right stakeholders difficult. Sales cycles can be lengthy and involve multiple evaluation, approval, and negotiation stages. Coming from outside the market, these considerations pose significant speed bumps to growth. Herein lies an additional advantage of partnering with a local market advisory firm that understands the market and individual institutions.
While the North American market offers significant opportunities for growth, there are obstacles to market entry which are often daunting for new entrants. Navigating complex regulations, establishing a strong market position, understanding the competitive landscape, gaining validation, and designing effective sales outreach are critical hurdles to overcome. By working with a strategic local advisor, fintech firms can mitigate these challenges, leveraging local expertise to accelerate their market entry and achieve sustainable growth in this lucrative market.