Strategy Note /

The fastest growing emerging markets in fintech

  • Covid-19 has accelerated global fintech growth but the effects have not been felt uniformly across emerging markets

  • Brazil, Nigeria and Egypt fintechs are the fastest-growing. Mexico outperforms on user growth, Indonesia on revenues

  • ARPUs are declining in all surveyed markets, except China; fintechs are pricing aggressively to gain market share

The fastest growing emerging markets in fintech
Rohit Kumar
Rohit Kumar

Global Financials/Thematics

Rabail Adwani
Rahul Shah
Tellimer Research
25 March 2022
Published by

Covid-19 has accelerated global fintech growth and the impact has been felt most deeply in emerging markets. We have surveyed 215 fintechs across 14 emerging markets to gauge their growth and identify KPI trends (such as ARPU, margins and customer acquisition). The summarised finding are presented below.

Overall, fintechs in Brazil, Nigeria and Egypt are growing the fastest. These populous countries suffer from restricted access to traditional financial services providers. In contrast, Saudi Arabia, Russia and Kenya fintech growth is lagging. Our findings also support the importance of scale in the fintech world – the fastest-growing firms tend to become profitable sooner.

Overall fintech growth in emerging markets

Faster-growing firms tend to be more profitable

Growth in technology companies is often accompanied by higher marketing, technology and customer acquisition expenses; investors may worry whether there will be any payback from these investments. Our survey results provide some comfort to investors; fintechs that have delivered faster growth in the past are now more likely to be profitable than those firms experiencing slower growth. This may reflect scale effects as well as better product-need fit in the case of the faster-growing fintechs.

Profitability versus growth for EM fintechs

Growth in user numbers is stronger in Nigeria and LatAm

The size of the user base is one of the key performance indicators for most fintechs and hence growing this is a major area of focus.

Key performance indicators for emerging markets fintechs

On average, emerging market fintechs’ user base has grown at a CAGR of 33% over the past 3 years. Brazil and Mexico (the two LatAm countries in our sample) are some of the faster-growing markets for this measure; there seems to be a strong acceptance of fintech products in the region. For example, consider Nubank, one of the most successful digital banks in emerging markets with a user base of 48mn. Nigeria ranks at the top, reflecting the country's large unbanked population; VC fund flows have been strong, supporting aggressive customer acquisition strategies.

Users growth for EM fintechs

Revenues of Brazilian fintechs are growing fastest; China is the only country with rising ARPUs

Average revenue growth across emerging markets over the past 3 years stand at 24% with Brazil, Nigeria and Indonesia growing the fastest while Russia, Saudi Arabia and Kenya are lagging.

Revenue growth for EM fintechs

Looking at average revenue per user (ARPU), almost all our sampled emerging markets are seeing a decline. We think this is because firms are prioritising user growth over revenues and hence pricing competitively to gain market share. China is the only exception – ARPUs here are rising. This is a much more mature fintech market than elsewhere in EM; fintech penetration is already high and hence firms are more focused on monetising the user base.

ARPU growth for EM fintechs

China and South Africa outperform on profit growth despite slower userbase expansion

Emerging market fintechs' operating profits have grown at a 26% CAGR, with Brazil seeing the fastest growth. South Africa and China are also growing strongly despite fintechs in both these countries seeing below-average user growth; they seem to have a greater focus on cost control than many of their peers.

Operating profit growth for EM fintechs

This is reflected in operating margins, with fintechs in China and South Africa experiencing the largest expansion in operating profit margin within our survey universe. In contrast, fintechs in Kenya, Saudi Arabia and Indonesia are seeing a contraction in their operating margins.

Operating margins growth for EM fintechs