“I wanted early stage sales people, pioneers, people who don’t need marketing collateral to paint the picture, because they know the customers, not the product.”
Currencycloud is a cloud based, cross-border Payment Engine. In the complicated payments processing ecosystem, its clients are businesses who want to build an international payment component into the transactions that they handle. Financial Services, however, is a highly regulated business, and with that comes regulatory divergence across different territories which meant significant differences for Currencycloud when they expanded into the US market.
High growth under the yoke of regulation
In Europe, a Currencycloud client like Travelex is regulated in their own right, which means that Currencycloud doesn’t have to contract with the end customer. In the US, many of the businesses Currencycloud work with are not regulated and so Dodd-Frank requires that they have a relationship with the end users.
Harder still, the business has had to cater to federal and state legislation, which means over 50 types of regulatory relationships. In Europe, UK regulation through the FCA is ‘passported’ automatically across the continent, whereas in the US, Currencycloud has to be approved in every state and the cost for the whole process can be as much as $5m. California and New York are of course priorities states for the business, and by the end of 2017 it will have the necessary approvals across half the country.
The US is the world’s single largest market so you’d think it would be a simple market when it comes to making cross border payments. Combined with federal and state regulations, the country is so diverse and widely spread across regions, sectors and cultures, that this is not the case. Compare this to the EU, which taken as a whole, is equal in size to the US and even more diverse, yet business are much more familiar with making cross border transactions.
So, should FinTech firms be expanding into the US? Absolutely! The US is poorly served by banks and existing cross border solutions. As a result, the potential for businesses that can provide a straightforward but truly innovative solution is huge.
Selling a promise instead of a product
Currencycloud CEO Mike Laven (a career transatlantic CEO) says his approach to the US was simple: “In 2014, I hired a couple of sales guys and asked them to help us understand the market by talking to customers.”
While some early stage companies looking to crack the US require the CEO to relocate to start the business, Currencycloud entered the market by bringing knowledgeable US employees on board first.
“I wanted early stage salespeople, pioneers, people who don’t need marketing collateral to paint the picture. Their job was to fully understand US customer requirements so that we could get market knowledge and feedback,” continued Mike.
“For about a year, it was anecdotal, not analytic. We were cautious until we had grasped the go-to-market differences. Through this approach we learned a lot and before we knew it we had 15 clients.”
That said, there are significant market differences. “In the US, sending money to Latin America and the Philippines is important, which we didn’t fully appreciate. Also the banking infrastructure is significantly behind Europe. For example, in the US everyone still pays by cheque. Whereas in Europe, sharing bank account details and moving money digitally is the norm.”
Building the borderless business
Currencycloud is practically borderless. Regulatory and service complexity means that every continent has its own identity, and its own team who understand the clients and the market.
“At the moment, most Currencycloud US employees come to the UK for training, but by 2018, that won’t need to happen as we’ll have enough local expertise.” By the end of 2017, the company will have around 20 employees in New York, in product, marketing, sales and service roles; and the US will match Europe for revenues by the end of 2019.
This is also reflected in the go-to-market strategy. Cross-border payments to power borderless commerce is Currencyclouds mission, regardless of region. But customer context, customer sophistication, priority of feature set, sales mechanism – all are different.
The big challenge now is how to drive a global business strategy, incorporating the US priorities. “We have to balance competing customer needs, to factor in what each market thinks, and make competent decisions, all while we scale,” continues Mike, “Right now, we’re a global business with an increasingly American accent.”
- Particularly in a regulated business, building out a proposition state-by-state can be challenging.
- That enforced inertia can also give you time to gain deep customer understanding and market knowledge.
- Aim to be global and borderless, nuanced to local needs but with a fundamental proposition at the core of the business.
This story was taken from Notion’s Crossing the Atlantic Report