By Vera Sharova & Teodora Cosic

Diversification is not a trend; it is essential for companies to become and remain competitive. With technology reshaping the global business landscape, many companies will be pushed to fundamentally reconsider their ways of doing international business, diversifying into new product categories and adopting a “borderless” expansion model. Undoubtedly, this is putting added pressure on FinTech executives.

Although digitization has a significant catalytic effect on these processes, a successful diversification strategy would still need a solid basis and a set of scalable growth patterns that could apply to target markets. The FinTech industry is not an exception and is yet to strike the right balance between timing and scope. The fast-paced expansion of FinTech companies into long-distance geographies has increased the Penrose effect, thus escalating the managerial constraints affecting organizational growth and development. It is not a result of a faulty strategy but rather a predictive outcome of high growth that can rapidly exhaust internal resources, including managerial ones. This resource-intensive and time-consuming process put additional pressure on FinTech executives while leading highly diverse and remote teams.

One of the main challenges of international expansion is the culture, or to be more precise, the cultural distance between the newly opened markets and the ones where an organization has originated. The diversity across markets results in a mixture of backgrounds of different belief systems, habits, and perceptions that govern the behavior of local team members. Understanding and embracing these differences and nuances has proven to be of utmost importance in creating a unified culture across all organizational levels. Moreover, the strength and flexibility of internal company culture are needed to adapt effectively to different contexts while staying faithful to fundamental organizational values.

A company with a robust value system that resonates with all employees and customers will draw more people to its product. It will most likely overcome cross-cultural barriers as it expands into new markets. We have shifted from a volume-driven to a value-driven economy, emphasizing the human perspective of economic and organizational processes. 

The logic behind our decision-making is the same when selecting products, services, or potential employers; we put our trust in the common cause. Two questions remain: What problem(s) am I solving? What good can I do as a person, an organization, and a society? Shared values between colleagues, clients, or customers create long-lasting professional relationships based on trust and integrity. Those are all prerequisites of successful business growth, especially when dealing with international expansion to distant markets.

Alex Lhéritier, Global Head of Working Capital Solutions at Kyriba, says: “Ensuring a two-way transparency and trust can prove essential to a leader in a constantly changing environment. For that reason, having regular team catchups that cover “check-ins’ that are both personal and professional can be highly efficient. Jumping directly and only on purely professional aspects (e.g., project status, sales numbers) could affect loyalty by giving the impression that you do not care about the person. 

Communication styles vary across cultures, and one has to respect them, but it remains that the ‘I care’ style works universally. Spending time to reassure people is also an opportunity to collect and address concerns and receive precious/honest feedback to fine-tune strategy and messaging. Because we often run short of time, it is easy to prioritize more immediate issues, but ultimately such choices are bound to backfire. Finally, ensuring strong adhesion by your team to your strategy and its delivery should ensure optimal delivery to customers, and further support your growth.

Another aspect of the challenges faced by FinTech leaders is managing teams through a series of transformations successfully. To do so, successful management of their expectations is essential. In marketing, satisfaction is defined by the alignment between expectations and delivery. In the corporate transformation field, achieving employee satisfaction through uncertain times and regular changes requires 1) correct identification of their expectations and 2) ensuring that delivery matches the former. Exceeding expectations may be costly.

Conversely, failing to do so would increase dissatisfaction, even if the delivery is right per se. The trick may consist of moderating expectations to match a delivery level that is hard to change. Key benefits involve higher staff motivation and retention, and a more robust organizational culture to overcome daily challenges.”

Value-driven organizations thrive in this new economy because they promote trust, open communication, diversity and inclusion, thus making fertile ground for innovation. We can see many of these examples on the market; some even developed with Chief Innovation, Chief Impact, and Chief Sustainability Officer roles on their executive boards. All these roles are designed to help companies extend their missions far beyond the core business and effectively incorporate the impact element into their value chain. This is particularly relevant in high-growth environments, where the speed of growth itself poses risks to the ability to create impact at scale and cultivate customer and people-centric organizational cultures.

Even though FinTech companies heavily disrupted the traditional financial industry, simultaneously, they have deepened the financial market by making it more inclusive. FinTech managed to do that by making financial services accessible and affordable globally. It enhanced cross-border payments and supported broadening the payment options available to individuals and the payment methods businesses can accept.

During their annual meetings in October 2018, the International Monetary Fund (IMF) and the World Bank (WB) released a paper called the Bali Agenda that was launched to guide global policymakers while drafting policies and regulations to maximize the benefits of FinTech and keep the financial system stable. 

The majority of elements included in the paper aimed at using FinTech to promote financial inclusion because it can reach 1.7 billion adults worldwide that do not have access to financial services. In the same year (2018), the EBRD’s Legal Transition Team published two studies to assist lawmakers and regulators in their active regions in regulating crowdfunding, innovative payment systems, and blockchain solutions. 

Ana Drašković, Global Business Development Director at EBRD, highlighted the importance of the framework that international financial institutions provide to the FinTech sector: “There is a role for international development organizations in the FinTech space – be it in facilitation, capacity building, peer learning, legal reforms or investing. EBRD has always been one of the leading innovators in the space of sustainable investing and also FinTech. While investment in the FinTech sector will require a slight shift in the risk appetite, the combination of policy advice and investment is what development organizations like EBRD are well placed to do. We recognized the challenge maturing FinTech companies are facing, as they might not be creditworthy to borrow, and addressed it by creating a small EUR30mn sandbox for granular loans to FinTechs. The most important feature of our new approach is that the weight of the risk analysis shifts from reliance on historical financial performance to the assessment of the business model and expected future performance as detailed in the business plan of eligible FinTechs. Providing senior debt to eligible FinTech companies will enable us to respond to the fast-changing FinTech industry and to strengthen our impact across 38 countries where EBRD operates.”

FinTech companies were able to drive innovation by being leaner and more agile in comparison with traditional banking institutions and therefore make more impact in terms of outreach. According to Crunchbase data, financial services was the leading sector for venture investment in 2021, with $134 bn invested, marking a staggering 177 percent year-over-year growth. That compares with overall global venture capital investment, which grew by 92 percent.

Financial sector incumbents responded to market disruptions by embracing FinTech companies instead of competing against them. The leading example, a 150-year-old American investment bank, Goldman Sachs, has diversified its business through a proactive M&A strategy. According to a Crunchbase report, it acquired 29 companies over the recent years, being heavily focused on the FinTech sector. Its pace of investing in financial services venture-backed companies has skyrocketed since 2017. To further strengthen its consumer finance business, towards the end of 2021, Goldman Sachs announced it was acquiring the largest FinTech platform for home improvement consumer loan originations, GreenSky, for $2.24bn in an all-stock deal. With this latest acquisition, it aims to create the consumer banking platform of the future and help tens of millions of customers take control of their financial transactions and drive higher returns.

The Monetary Authority of Singapore (MAS) started the first Defi trade pilot project with DBS Bank, JPMorgan Chase & Co., and SBI Digital Asset Holdings that conducted foreign exchange and government bond transactions against liquidity pools comprising tokenized Singapore Government Securities Bonds, Japanese Government Bonds, Japanese Yen (JPY) and Singapore Dollar (SGD). Beginning of November 2022, JPMorgan Chase & Co. used the Polygon blockchain to trade tokenized cash deposits.

Organizations in the financial industry are under continuous pressure to align their growth and cultural perspectives. We often hear from our clients that they are afraid of “losing part of their culture” as the business grows and scales. The core challenge here is to stay loyal to the vision and values of the company while developing a capacity to adapt continuously to changes. 

Will culture get transformed in this context? Probably, yes. Should it be seen as a negative outcome? Of course not, as anything in a growth organization has a dynamic nature: organizational chart, processes, day-to-day priorities, and culture. Inclusive and diverse organizations are the most resilient ones in this context; they help keep teams aligned and engaged and are fundamental for building employer brands. This is especially relevant when the talent competition has never been as intense as it is now.