• Ivan Ferdelja

Launching in a new country

What to keep in mind when imagining your product living abroad

Why even consider a new country?

Expanding to a new market can be a part of a growth strategy. If the current objectives demand growth then expansion to a new country is definitely a tactic to consider.

For company with a relatively new product and limited resources it might make more sense to grow by further penetrating the domestic market.

Which country to choose?

When considering a new country there are a number of political, cultural and economic factors to take into account.

Different markets can vary widely in terms of market size, income, language, social aspects and many other important dimensions. Potential diversity and complexity of different market opportunities - so this step can easily feel overwhelming.

For a fintech, it is crucial to understand views on personal finance in the potential new market.

There are a few different strategies to apply on selecting a potential country.

An elimination approach might start by e.g. looking at all EU-28 countries and then removing those least likely to promise economic benefit. However, a small or moderately sized company will likely not have the resources, knowledge or simply time to run such an extensive elimination project.

For such a company it's much more reasonable to choose an agile approach and select a single country that has the least intellectual and even geographical distance. For Swedish companies Norway or Denmark would be a logical choice.

This means start simple, close to your country from origin and learn from there. Once a familiar environment has been sufficiently understood, it might make sense to expand further away.

Starting up business operations abroad can be costly so once we have selected a country it is important to run a high-level screening process to evaluate potential costs.

Cost of adapting the product to the new market can range from simply cost of marketing in a new language to having an all together different supplier to provide the same service abroad.

A big factor when choosing a country is the so called entry mode. In simple terms this means choosing either a licence model or a subsidiary to run the business abroad.

Entry model is especially important in the fintech world, due to an very high level of regulation. Within Europe, passporting of financial licences simplifies these decisions considerably.

How would the basic value proposition work?

Let's assume you selected THE country where you believe your business might flourish. And let's assume you have a single product you want to launch in that country.

Next very important part of the screening is to understand how well your CVP (Customer Value Proposition) holds in this new country.

In a typical fintech such as Revolut, CVP is made a reality through core functions such as KYC, adding money to your neo-balance and then some neo-functions on top of that.

These core functions are typically provided by multiple partners in the background, all orchestrated seamlessly in the mobile app.

A KYC process might rely on advanced digital identity providers (standard in Scandinavia) to a more manual national-document based approach common in the rest of Europe. Signing up for a new financial service in Norway might mean just using your fingerprint, but in Germany you likely need to scan your passport to prove who you are. This can bring various risks and costs to launching your operations in the new country.

This get even more complicated when looking at payment services and moving money from a customers legacy account to their Revolut balance. Scandinavia is again the European leader with services such as Swedish Swish and Norwegian Vipps providing a seamless experience to customers. But, seamless as it may be for customers, to potentially run a business operation with a new payment provider, the cost difference must be a primary concern.

Would the business ultimately benefit?

Launching in a new country is quite an expensive tactic to achieve growth.

It is critical to evaluate all relevant factors, cost of developing the new market and most importantly the possibility and cost of achieving the same offer you already have at home.

At the end of the day, the important thing is to keep the decision simple and ask yourself if there is a more cost-effective way of achieving your goals.