Innovation is global. This is well known.
But what is under-appreciated are how the best ideas often emerge globally in waves. I call this the innovation supply chain.
Fintech is at the forefront of this shift. To capture the opportunity requires understanding how it manifests itself and preparing for the next wave.
Let’s start with the former by exploring three examples.
Example 1: the rise of neobanks around the world
A cadre of next-gen digital banks began to reach meaningful size and valuation in Europe in the mid 2010s. These include companies like N26, Revolut and Monzo.* They took an ecosystem approach, acquiring customers first with a bank account and then offering them a range of products and services. Around the same time, Nubank was rapidly scaling in Brazil offering a credit-led model (similar to Capital One
This progress in turn influenced emerging players in other markets. The ensuing business models reflected a mix of the successful players everywhere. In Brazil, the rapidly growing digital bank Neon has a mix of a debit interchange and credit led models, and in Mexico a range of players are emerging like Klar (credit-led) and Albo or Cuenca (account-led).
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Today, there are players around the world using a variety of business models, some of which are stronger and more resilient than others.
Example 2: buy now pay later
In a similar vein, next-generation "buy now, pay-later” (“BNPL”) models have scaled globally in a wave. Affirm, which recently went public over $20b, was launched in the US in 2013. Over time, other players started to scale like FinAccel (Singapore, 2015, a Cathay Innovation portfolio company) Afterpay (Australia, 2017), Zest Money (India, 2015), Addi (Colombia, 2018) and most recently Alma (France, 2018, also a Cathay portfolio company).
See below the European map for a snapshot of what it looks like:
These models are also scaling in different ways. In emerging markets, where there is less online penetration, players are building more of an omni channel approach to cover physical stores with similar offerings.
When the market is more underserved, BNPL is expanding to offer a suite of solutions, covering other neobank-like products, including bank accounts.
We are also seeing adjacent players looking to offer BNPL as part of their own offering for the same reason (as Grab, the ride-sharing Superapp recently announced in South East Asia, as have vertical ecommerce players across many markets). This is symptomatic of the full-stack in emerging startups.
I expect we’ll see a similar cambrian explosion of buy-now-pay-later players around the world. Here again, different business models will scale and succeed in different ecosystems.
Example 3: Payment Superapps
Superapps are an active fintech wave scaling the world today. Pioneered in China, Superapps expand their core service with an integrated payments and identity offering. Through this, they can offer a range of products and services directly in the app. WeChat, from Tencent, started as a social network (akin to Whatsapp in the US), but now offers a diverse app store: today, users can purchase goods, access telemedicine and get their news entirely in one app.
This move is scaling globally, with many startups around the world looking to evolve their business models toward becoming a Superapp. And of course, the starting core offering is not exclusively chat. In Southeast Asia, players like Go-Jek and Grab are evolving from a ride-sharing model to layering in financial services and with that, powering a range of other options including food delivery, massages, doctors visits, etc. In Latin America, Cabify and Rappi are evolving from the on-demand economy. Elsewhere, like in the case of PayTM in India or Toss in South Korea, the original product was in financial services.
Notably, many of these global innovations are influencing the original. Think of Go-Jek’s influence on Uber
This is not an isolated example, or unique to fintech
The three examples above are just a few of many. The best ideas will continue to emanate around the world and be replicated everywhere.
For example, direct to consumer insurtech players like Lemonade (renters), Hippo (home) and Root (car) were built early in the U.S. but similar models are scaling around the world.
Revenue based finance – an alternative source of capital to venture capital – is becoming a powerful force. Many leading players, like Clearbanc in Toronto, Lighter Capital in Seattle, are scaling outside of Silicon Valley.
Fintech infrastructure, including models like Plaid, are increasingly popping up all over the world.
And of course, these shifts are not exclusive to fintech, but various models, like social commerce, ride sharing, etc.
Why this matters:
Of course, seeing into the future is impossible. But as William Gibson once quipped: “The future is already here. It's just not evenly distributed yet.”
For founders, investors and ecosystem builders, identifying these trends early offers a window about what models may emerge locally and an opportunity to have a seat shaping it.
The success of early players in any given trend offers a halo to the broader space. The success of Nubank, Chime and others lifts the broader neobank space, as does Affirm’s IPO in buy-now pay later.
While borders are seemingly rising up around the world, to succeed in innovation requires a global view now more than ever.
