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Emerging markets fintech: The markets and segments that are growing fastest

  • We surveyed 215 emerging market fintechs to gauge their 3-year growth trajectories for users, revenues and profits

  • By region: Brazil leads for revenue and operating profit growth; Russia trails in revenue and ARPU trends

  • By product: lending leads for user/revenue growth, operating margin trends; insurtech, blockchain are laggards

Emerging markets fintech: The markets and segments that are growing fastest
Rahul Shah
Rahul Shah

Head of Corporate & Thematic Research

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Tellimer Research
25 January 2023
Published byTellimer Research

Our proprietary survey of 215 fintechs allows us to gauge which parts of the EM fintech ecosystem are seeing the fastest growth, and where momentum is lagging.

This report compares trends across regions and products, breaking down the data across the following metrics:

  • Users

  • Revenues

  • Operating profit

  • ARPU (average revenue per user)

  • Operating margin 

Fintech growth rates in emerging markets

Below, we provide a detailed breakdown by country and by fintech product. 

Fintech growth rates by country

Nigeria

With access to Africa’s largest population, Nigeria's fintechs benefit from strong growth in users and revenues. We think two key drivers are the low levels of financial inclusion (just two-fifths of adults have a bank account), which gives plenty of room for further growth, and rising smartphone penetration (up 10% points in the past decade, to 37%).

Brazil

Fintechs in Brazil, Latin America's most populous country, lead the way in revenue and operating profit growth. Key drivers include slow-moving incumbents, favourable regulatory developments (such as the roll-out of the PIX instant payments platform in November 2020) and increasing acceptance of digital channels by consumers.

Mexico

Mexico’s fintechs have benefitted from solid growth in users, no doubt helped by the low level of financial inclusion in the country. However, ARPU is falling sharply, which points to a high level of competition and limited pricing power. According to our industry survey, Mexican fintechs are targeting transaction value and customer loyalty as their top KPIs, both of which would help support ARPU.

Vietnam

Vietnam’s fintechs have seen some of the best operating margin trends in the EM universe. We note that the number of internet users in Vietnam has almost doubled since 2017. In the context of low levels of banking access, this has had a positive effect on the use of fintech products.

Egypt

Egyptian fintechs' growth rates are largely in line with those of their global EM peers. There is significant growth potential, given the large population, sizeable informal economy and low levels of financial inclusion. Improved technological infrastructure and better regulation are key catalysts for faster growth.

India

Indian fintechs are enjoying higher user growth than that of their EM peers, reflecting the large target customer base and rapidly improving digital adoption. However, ARPU is declining faster than elsewhere, which could be due to a combination of low individual purchasing power (as poorer groups are increasingly targeted), and the tough competitive environment.

Indonesia

Although Indonesian fintechs are experiencing healthy top-line growth, their operating margins are declining. Our survey noted that one of the main growth constraints in this market is competition from other fintechs – international players are increasingly targeting this large market.

Kenya

Kenya has the weakest fintech operating margin trends in our sampled countries. Payments fintechs make up the largest slice of the ecosystem; firms here have to work side-by-side with M-Pesa, the dominant operator, which may be limiting their ability to generate healthy margins.

Pakistan

Pakistan fintech growth rates are broadly in line with those of the global peer group. As in neighbouring India, ARPU is falling sharply, but the reasons are likely to be different. Our survey cited slow customer adoption as the main growth constraint Pakistan’s fintechs are facing. Cash is a much more dominant force in Pakistan versus India, and individuals are not yet seeing sufficiently compelling use-cases to switch to digital transactions.

Russia

Russia’s fintechs have the lowest growth in revenue and the weakest ARPU trends in our sampled countries. They cite funding as their biggest growth constraint; sanctions following the invasion of Ukraine have certainly not helped. Press reports suggest many skilled workers have left the country since the war started, which is also likely to affect the pace of innovation.

South Africa

South African fintechs have the strongest operating margin trends within our sampled markets. According to our survey, they have indicated that their main market opportunity is the high transaction costs levied by traditional incumbents, which gives fintechs more flexibility to set prices and raise operating margins.

Philippines

Philippines fintechs in aggregate have one of the slowest user growth rates in our poll, which seems surprising given the low level of financial inclusion in the country. Firms may be acting in a more selective manner than in other markets; we note that ARPU trends in the country are better than average.

Saudi Arabia

Fintechs in Saudi Arabia have the weakest operating profit and operating margin trends in our sample. Relative to other EMs, fintechs in Saudi Arabia seem to be at an earlier stage of development and are making significant investments in product development, marketing and sales, which for now is holding back profitability. 

China

China's fintechs typically have the slowest growth in users across our sampled countries, which makes sense given the sector’s more advanced state of maturity. In contrast, it is the only surveyed market with positive ARPU trends, which is an attractive target for other markets to aim for as they mature. Rising use-cases, broader offerings and larger volumes are all contributing to this statistic.

Fintech growth rates

Fintech growth rates by product

Lending

Lending fintechs are seeing superior growth across many areas. They are benefitting from improving credit access for low-income individuals and small businesses. Moreover, this product area is fundamentally more profitable than other fintech segments due to the high contribution margin and high contribution per user.

Payments

Payments fintechs have faster operating margin growth than fintechs in other segments. These firms are also enjoying rapid user growth. Increasing smartphone penetration and better mobile data access have been key tailwinds. The Covid pandemic also accelerated the adoption of digital payments technologies.

Software solutions

Fintech software solutions firms have above-average operating profit and operating margin growth rates. They have cited their top success factors as innovative service offerings, extensive distribution networks and user-friendly platforms. The rapid growth in the broader fintech ecosystem and increasing interest in open banking systems have also been key growth drivers for this segment.

Investech

Investechs have experienced lower revenue growth than firms in other fintech segments. The challenges thrown up by the covid pandemic, and the more recent rise in living costs, have likely been a factor as individuals focused on meeting their essential needs. Investechs are likely to fare better once more basic financial services requirements (such as digital payments and loans) are met.

Insurtech

Insurtechs have experienced higher ARPU growth than firms in other product areas; we think this reflects their ability to provide coverage that better meets their customers' needs. That said, their operating margin trends have lagged. In our survey, over half of insurtechs indicated that they had weak pricing power.

Blockchain

Blockchain fintechs have seen weaker user growth and operating margin trends than their peers. The low user growth likely reflects a range of factors: poor regulatory support and volatile trading performance for cryptocurrencies, and, for non-crypto applications, the technology is still relatively new and complex for many users, which creates adoption barriers. 

Other

User growth lags for fintechs not included in the categories above (a diverse group that includes crowdfunding, tax solutions and credit ratings). This may be because these firms must often create a market not just for their own brand but also for the overall product category. 

EM fintech growth rates