Before delving into the realm of fintech companies, it is important to start this article with a brief historical background.

Back in the late 1930s, airplanes were considered the cutting-edge technology for reconnaissance. They provided a faster and more cost-effective way to gather intelligence compared to deploying scouts on the ground. The British Empire used airplanes to keep an eye on the vast territories of Malaya from Singapore without having to physically enter the region.

The reports from the aerial reconnaissance described Malaya as densely covered with “impassable” forests. Based on this information, the British concluded that any potential invasion of Singapore would likely come by sea. As a result, they directed their cannons towards the sea in anticipation of a naval attack by the Japanese.

However, history took a different turn as the Japanese army invaded from the north through Malaya, catching the British off guard. By the time the British forces were ready to counter the invasion, the Japanese had already occupied half of Singapore.

The failure of the British strategy raises the question: What went wrong?

Despite using the latest technology to gather intelligence, the British overlooked the ground-level reality in Malaya. While airplanes provided a broad overview of the region, they failed to account for the specific terrain and conditions on the ground, allowing the Japanese to advance swiftly through Malaya undetected.

The Lessons for Tech Companies

Today, Western tech companies are looking at emerging markets and making broad assumptions about the next billion users (NBU). The emerging middle class in countries like India, Pakistan, Brazil, and Nigeria presents a lucrative opportunity for tech companies.

However, it is crucial to recognize that these markets are not homogenous. While the challenges may be similar across these countries, the solutions need to be tailored to the specific needs and preferences of the diverse NBU population. Google refers to this segment of users who came online between 2015 and now as the next billion users.

To succeed in these markets, tech companies must focus on addressing the unique requirements and preferences of different subsets within the NBU population. Instead of a one-size-fits-all approach, companies need to adapt their products to meet the specific demands of each market.

The Role of Fintech in Reaching the Next Billion Users

Fintech presents a significant opportunity for major players to tap into the NBU market. By partnering with governments and banks, these companies can leverage their resources and expertise to deploy fintech solutions on the ground.

However, traditional fintech solutions like digital payments may not always address the real needs of the next billion users. Many people in emerging markets still prefer cash transactions despite the societal challenges associated with cash. This disconnect between the solutions offered and the actual preferences of users poses a challenge for fintech companies.

Furthermore, the top-down approach taken by many companies and governments fails to consider the ground realities and customer problems of NBU countries. For example, China’s success in fintech was driven by the unique financial ecosystem in the country, where traditional investment options were limited for the average person.

In contrast, smaller players focusing on specific segments, such as MSMEs, have found success by addressing the real needs of merchants on the ground. These nimble players have built businesses that create tangible value for their target customers, demonstrating the importance of understanding the specific market dynamics of the NBU population.

The Future of NBU Markets

As the future unfolds, the winners in the fintech space targeting NBU markets will likely be companies that understand the distinct and fragmented nature of these markets. While there may be a unified solution in the future, for now, the focus should be on serving specific segments with tailored products and services.

Addressing the challenges in NBU markets, such as data scarcity, literacy issues, and linguistic diversity, will require unique and localized solutions. The days of a one-size-fits-all global technological solution may be gone, replaced by a more nuanced and localized approach to addressing the needs of the next billion users.

Ultimately, success in reaching the next billion users will depend on companies that ground their strategies in the realities of the local markets and prioritize value creation for their target customers.

–

Editor’s note: e27 aims to foster thought leadership by publishing views from the community. Share your opinion by submitting an article, video, podcast or infographic

Join our e27 Telegram group

Image credit: ximagination

This article was first published on July 21, 2021

The post Fintech companies targeting the next billion users are living a pipe dream. Here’s why appeared first on e27.