People need access to financial services –– wherever they are based –– to develop their businesses and plan for the general ups and downs of life. Until recently, gaining access to these services has usually involved cumbersome red tape and high costs, leaving whole populations behind.
However, in this era of digitization and decentralization, technology is able to easily provide service options to underserved populations in ways that were never before possible. And they can do it while achieving a significantly better experience with cheaper execution in comparison to traditional financial providers, or in many cases, where there are no incumbent players.
Speedinvest believes technological innovation is not an option but a necessity –– in Europe, the United States, and Emerging Markets (EM). Knowing this and understanding that Financial Services are the veins through which economies live, we decided to tackle this opportunity from the foundation up. And it’s already leading to exciting investments across all sectors. Take a look for yourself!
We focus our investments in five major geographic sub-regions, each with individual characteristics and market dynamics: Latin America (LatAm), Africa, the Middle East, South Asia, and Southeast Asia.
Within each region, we’ve seen only a couple of countries that have been able to rapidly establish themselves as tech-hubs capable of attracting outsized private investment –– whether through a local fund scene or through foreign funds from adjacent countries. Below are some of the countries that have seen or are currently seeing an outsized influx of capital:
We are seeing a great deal of new and alternative business models emerge across the globe, and we at Speedinvest are committed to investing in those that will disrupt the way financial services work for customers. The following is a summary of what we see as the hottest trends in Fintech in Emerging Markets, and how we will be investing in the future.
Financial tools for SMEs and Micro-SMEs:
As income levels change, demand for goods and services is surging in EM and it’s fueling the development and expansion of SMEs and Micro-SMEs (MSME). As a result, they account for a significant portion of the GDP of developing economies. Operating and growing your SMEs operations is no small feat, so new fintechs are cropping up to provide tools that support businesses in affordable ways;
Information is becoming ever more connected and valuable, making data-driven business not just good practice, but necessary to compete in crowded markets. Fintech is no exception with many technologies built around leveraging alternative data points to offer differentiated financing options. Here are a few bets we’re taking in this space:
The Emerging Markets Fintech team at Speedinvest has doubled down on its conviction in the revenue-based financing (RBF) space with our investments in Fairplay in Mexico and Flow48 from the UAE. RBF allows companies to fund their marketing spend and working capital based on data related to their underlying contracts and predicted revenues. Having discovered the model’s potential with an early investment into Wayflyer (based out of Ireland), we are confident that ecommerce’s growth and globalization can spur similar growth stories worldwide.
As the nature of work and wages evolve across the world, so do many of the demands and needs of employees working in these markets. Startups aimed at providing the benefits of greater financial freedom to employees are gaining in popularity, and we’ve made our own investments in the space:
Earned-wage-access platforms such as Khazna in Egypt and Abhi in Pakistan are increasingly becoming a major trend in emerging markets. Employees that face cash-flow issues are able to borrow against their “accrued wages” to pay for their day-to-day needs and smooth their income cycles.
DeFi’s decentralized and open-platform nature allows many unbanked or underbanked individuals in emerging markets the opportunity to participate in the international financial system in an affordable way. The ability to transact cheaply (through payments or remittances), invest in or hedge market/currency risks (investing in stocks or holding stablecoins versus local unstable currencies), and inclusivity were all previously unachievable for much of the population under the traditional financial system.
Speedinvest has been investing in the DeFi ecosystem for many years, building expertise within the relevant teams and a portfolio of early winners. For example, our Austria-based portfolio company Bitpanda has been leading the way in enabling retail investors to access tokenized digital assets. Their platform offers fractional shares of both liquid and traditionally illiquid assets, supporting over 30 digital assets.
Given the particular benefits that DeFi has in EM versus developed markets, there is an opportunity for countries to leapfrog traditional technologies and lead the way –– a phenomenon seen in markets like Argentina, Singapore, Brazil and India, just to name a few.
However, DeFi as it currently stands is not without risks. Operating in largely unregulated markets means there may be issues with regulatory conformity once governments slowly catch up.
We are seeing emerging players looking to provide infrastructure across trading, banking, and embedded finance rails. Whether it's through private-sector or public-sector initiatives, it’s clear that regional markets are looking to replicate the successes of concepts like Open Banking in other countries, and are leveraging local or foreign investment to either create digital rails for the first time or overhaul legacy ones.
The introduction of Open Banking fueled a wave of top unicorns such as Plaid (US), Tink (Sweden), and Cashfree (India). It allows for the interconnection of all the financial services data that banks, payment institutions, or fintechs have. By doing so, they are able to share information (decided by the end customer) to other financial services as well as initiate payments between accounts.
While there have been similar, government-led attempts to recreate Open Banking outside of Europe (with two clear success cases in India’s UPI and Brazil’s PIX), adoption of these government initiatives has generally been sluggish and limited to the country in which it has been introduced. The job has therefore fallen on entrepreneurs and startups to fill that gap.
By leveraging our fintech experience in Europe and working closely with local partners, we built a global Emerging Markets portfolio of fintechs and fintech-enabled companies. With every new investment and region we enter, we aim to gain greater knowledge and insights to better serve our current Emerging Markets portfolio, which currently holds, along with Open, an additional 4 globally recognized “soonicorns”; Fairmoney, Lummo, ShopUp, and Moove according to Dealroom.
With this thesis, we have raised a dedicated vehicle to continue supporting founders beyond European borders. We focus on backing entrepreneurs from Pre-Seed to Series A stages looking to support their teams with any help we can provide to sustainably grow their business.