Why Fintechs expanding to the EU struggle?

US-based Fintechs expand to Europe thinking it’s more of the same. It’s not.  A few things they should keep in mind when it comes to data:

• Regulations - ok yes, there’s GDPR and you need to validate consent, protect user data and utilize it for the stated usage only. There’s one thing that’s easy to forget though - EU consumers’ data must stay in the EU. Fintechs that have any data-based operations or R&D need to conduct them on EU territory.

• APMs - the European affinity to APMs (BNPL, A2A, etc.) means that financial data can take all sorts of forms. Not only that, “bad” transactions manifest in different ways. Chargebacks are not everything anymore and Fintechs’ exposure to credit risk is also much higher.

• Vendors - data vendors tend to perform differently across regions. Whether it’s coverage or accuracy, Fintechs need to onboard new vendors or at least expect diminished performance up until they do so. Especially when it comes to vendors that cater to specific APMs.

• Fraud patterns - although Europe is a low-risk region when it comes to fraud, it is similar to LATAM in the sense that there's much more domestic fraud rings than in the US. Coupled with smaller countries, it means that much of the fraud is very hard to detect with “proven” heuristics that work well in the states. Don’t forget also about attacks directed at local APMs.

• Language normalization - it’s pretty straightforward to normalize “street” to “st.” when matching addresses. But what happens when you need to add “str.”, “strasse” and “straße” just to support German as well? Language normalization and matching is now a x5-10 bigger problem.

And I’m sure I missed some…

Don’t get me wrong though, these are all just a subset of a bigger business problem. However, there are many Fintechs that think that if they just hire a local G2M team and spend some on product development they’ll be able to port their US-based success to the EU overnight. How many Fintechs do you know of that managed to do so successfully?