In this note we focus on the revenue generation capacity of listed emerging market fintechs. Future reports will discuss other aspects of fintech economics, such as customer acquisition and servicing costs, margins and profitability.
Our survey of 900 emerging market consumers highlights that fintech consumers are extremely price sensitive. The ability of fintechs to monetise their customer base is therefore an important indicator of product-market fit and business model robustness. Average revenue per user (ARPU) across our 20-company sample stands at US$84, but there is a wide dispersion by sectors and geography. We delve deeper into these aspects below.
Pricing is a key decision factor for fintech consumers
According to our survey of 900 individuals across 14 emerging markets, around 60% of fintech users think that pricing is an extremely important factor in their decision to select a service provider. As we have highlighted previously, this indicates that fintechs do not have the level of pricing power they think they do. Retaining and monetising their customer base could prove to be challenging even if fintechs successfully attract large numbers of customers to their platforms.
ARPUs are closely linked to per capita income levels
Looking at ARPU generation by market, China leads with per user revenues exceeding US$300 while other Asian countries rank at the bottom. These differences can be explained by looking at the different income levels in these countries, as highlighted below. Note, however, that higher ARPUs do not automatically translate into higher profitability; customer acquisition costs may also be higher, for example. We will explore these issues in subsequent reports.
Investech and lending fintechs generate highest ARPU
Investech companies within our sample have the highest revenue per user of around US$430. We think this is because investech users are usually more affluent, and retail trading activity was boosted during the pandemic. Lending fintechs also generate higher ARPUs, which may again reflect a skew to more affluent customers, but also reflects compensation for the credit risk these fintechs are taking on.
In contrast, insurtech platforms have some of the lowest ARPUs in our sample, but we think this relates to idiosyncrasies in our dataset. Our insurtech sample is tilted toward insurance marketplaces, which typically generate commission revenue on insurance sales and this is much lower than the premium that the actual insurer would earn. Payments and digital banking also have a lower ARPU; digital banking is still a relatively new industry in many emerging markets and we think the focus of our sampled companies is currently on acquiring customers rather than monetising them. As these companies grow and broaden their product offerings, these ARPUs should rise.
ARPU growth is highest for payments and LatAm fintechs
Looking at our listed fintech sample, ARPUs are generally growing. The fastest growth is in the payments sector and companies operating in LatAm and India. Payments companies are increasingly achieving scale, so the focus of companies is now turning towards monetising their customer base. Investechs, in contrast, are seeing a decline despite having higher ARPUs – this could indicate rising competition within the sector.
The listed fintechs generating the highest ARPUs
Within our sample, Futu Holdings, Up Fintech and FinVolution attract the highest average revenues per user. Futu Holding and Up Fintech are both digital wealth management and brokerage platforms operating in China; per capita income in this country is higher than many other emerging markets, and retail equity trading activity in this market is also high. FinVolution is a consumer lending platform in China and is benefiting from rising credit penetration in the country.
