Why Emerging Markets Are Important for Fintechs in 2022

The top 3 reasons why every investor with a specialization on the fintech sector should think about making investments in developing nations including those in South East Asia, Latin America, and Africa

Arturas Svirskis

4/7/2022 1 min read

Even while financial services are available everywhere, numerous nearly developed regions are still underbanked or unbanked altogether. The rising market landscape appears to be quite challenging. But it also gives businesses a lot of possibilities, particularly in the field of financial technology. Innovative fintech firms can find a huge new market for expansion and success.

These businesses may provide universal access to the digital financial system to developing economies. Fintechs have the ability to deal with regulatory concerns, poor consumer protection, and outmoded technology. The alliance between fintech firms and the developing world looks promising. Let's look at the reasons that growing areas should be of interest to fintechs in 2022.

What are considered "developing markets"?

An economy that is integrating into the world market is considered to be an emerging market. To put it another way, an emerging market is a state with low income that is transitioning into a contemporary economy with a greater standard of life.

The following are some typical traits of such markets:
* low earnings
* Gaining ground growth
* Political turbulence
* internal structural problems
* Currency disparity

However, one crucial feature of developing markets is their ability to implement reforms similar to those in contemporary industrialized nations, which promote economic growth. The biggest developing nations are MENA region, LATAM, Africa and South East Asia.

Why should fintechs emphasize at developing economies?
EMs show themselves to be fruitful environments for financial technology. Let's look at the main justifications.

1. Growing e-commerce and a large consumer base

Emerging markets experience a growth in e-commerce. The number of online retailers and customers has expanded as a result of improved internet connectivity and the popularity of mobile apps.

Without digital payment systems, however, it is difficult to operate an online business. Additionally, because e-commerce is always expanding, emerging economies may benefit from fintech services that go well beyond standard payment alternatives.

Even though the majority of transactions in these locations still take place in cash, more and more nations are abandoning paper money. Additionally, the transition to electronic and digital banking is accelerating.

2. Less restrictive legislation

The banking sector has historically had trouble developing because of legal compliance. Any western financial organization must always be informed of new and current legislation because to the significant penalties for breaching the law.

However, EM governments grant more freedom of action since they understand the need for a more equitable financial system. They offer lenient rules, encouragement for growth, tax breaks, and straightforward terms and conditions.

3. Those who are receptive to new financial technology

85 percent of the world's population, which accounts for 40 percent of global economic activity, is concentrated in the developing markets. EMs boosted their share by 10% during the previous ten years as their economies shifted away from export-based strategies and toward ones that were more consumer-focused.

Additionally, those under the age of 30 make up about 90% of the EM population. Young individuals who are tech-savvy adapt new technologies more quickly and use digital items more frequently.

As a result, EMs consumption is anticipated to double from 2013 to 2025, reaching $30 trillion.