And yet, even as investors flock to those companies, many of them have steered clear, for now, of significant international expansion.
“Most financial service businesses don’t lend themselves to simple plug-and-play across borders,” said Nigel Morris, managing partner at QED Investors. “There’s a different regulatory climate and a different set of issues around how and what you can and can’t do from a regulatory standpoint.”
The regulatory differences have allowed a plethora of companies to replicate the most successful fintech models and adapt them to their local markets.
Various fintech categories have been imitated, but five of the most notable are:
• Buy now, pay later, platforms that consumers use to pay for purchases in installments. One of the oldest companies in this category is Stockholm-based Klarna.
• Neobanks, sometimes called challenger banks, are fully digital companies that use apps and other online platforms to serve customers. One of the earliest successes in this category is San Francisco-based Chime.
• Investing platforms allow individuals to trade stocks and other financial instruments online and are often commission-free. Silicon Valley-based Robinhood, which went public in July at a valuation of more than $36 billion, pioneered the commission-free approach.
• Financial data aggregators allow companies to connect to their customers’ bank accounts and credit cards. San Francisco-based Plaid is considered the leader in this category.
• Payment processing platforms enable businesses to send and receive digital payments. San Francisco- and Dublin-based Stripe is by far the most successful payment processor.
Once the imitator startups have traction in their home market, they often expand to other countries in the region because the regulations are more similar, said PitchBook fintech analyst Robert Le. This is why companies based in Latin America often have ambitions to serve the entire continent, while European startups have focused on EU member nations.
Morris agrees. “If the business works, and the whole geography is big enough, these companies got their work cut out for a long period of time,” he said.
The map shows the leading companies in each category around the world:
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