Analysts expect the global recession to have a direct impact on fintech investment in developed markets across the world, but where does this leave emerging markets in regions such as Latin America and Africa? Well, as the Covid-19 pandemic accelerated digitalisation in specific markets such as Colombia and Nigeria, I expect to see remarkable success in these regions despite investment slowing down elsewhere.

Emerging markets have much to offer in the way of being used as test-beds for new payments technology and innovation, in addition to playing a key role in the investment strategies of international businesses and demonstrating sustained demand for new fintech products.

Emerging market investment as a strategic business plan

Ensuring business growth is a key determinant of business success during a global recession and investing in emerging markets can be an effective means of increasing merchant resilience and agility. Emerging markets around the world have seen increased access to fintech products and services through greater smartphone penetration and partnerships between ecommerce platforms and fintechs, such as PayU’s partnership with eMAG in Romania.

With this, new retail trends have emerged, such as the ecommerce boom that ensued during the pandemic, which shifted consumer preferences for good. For example, Africa is expected to surpass half a billion ecommerce users by 2025, demonstrating the interest in shopping online and appreciation of international goods and services. What does this mean? It means that there are now significant opportunities for international retailers to tap into emerging markets and diversify the markets in which they operate, maximising profit and building sustainable income elsewhere.

With investment likely to continue, it necessitates continued fintech investment in the coming years to ensure that retailers can offer customers in new markets the payment methods they prefer. Some regions such as Africa have already fared well while the rest of the world saw investment decline. In Africa, fintechs accounted for 62% of all start-up investments last year, and as broader investment in Africa will continue, it is likely that fintech investment will continue as well. This rings true not just for Africa, where I am based, but for emerging markets around the world that present new investment opportunities to global businesses.

The value of fintech as uncertainty ensues

During periods of economic uncertainty, there is an even greater demand for payment products and services that allow customers to spend with added convenience and save with online bank accounts. In the past, financial exclusion has inhibited many from having a safe and secure place to store their money, nor did they have access to payment methods that could offer them credit to purchase essentials when cash wasn’t readily available.

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Times have changed. I expect to see shoppers in emerging markets start to recognise the value of alternative means of payment that allow them to shop with additional convenience and store their money away safely. Nigeria and South Africa are leading the way in terms of digital bank accounts, accounting for 80% of digital banks in Africa, with approximately 27 million customers. In Brazil, fintechs reached more than 21 million downloads per month in 2021, demonstrating the demand for fintech products and services.

As inflationary pressures pinch households and shoppers become more mindful of where and what they spend in the coming months, the onus will be on the payment methods available in emerging markets to account for customers’ changing needs. Ergo, with a greater reliance on new products and services, I expect to see the popularity of fintech products and services grow as shoppers look to technology to support them with their money woes. This will see fintech investment in emerging markets sustained, if not increased soon.

Not missing a sale

One of the biggest concerns for merchants preparing for the recession is ‘cart abandonment’, a term used to describe when a visitor to a web page leaves before completing a purchase or action. As international retailers set up shop in emerging markets and develop omnichannel offerings with websites and physical stores, cart abandonment can limit success in a new market.

Research has found that, globally, shopping cart abandonment is at 70%, demonstrating the severity of the situation. What this tells us is that there is a greater need for merchants to keep customers engaged and offer simple and secure payment methods to reduce the number of abandoned carts and stop shoppers from going elsewhere. Whether it is offering deferred payment options, mobile payments or even QR payments, offering customers the payment method they want will decrease the risk of cart abandonment.

With the opportunities in emerging markets now on the radar of many international merchants, the focus over the coming months will be on how fintech can support emerging markets through sustained investment. With such innovation in emerging markets and great receptivity to new products and services, I feel that there is great opportunity for emerging markets to see success despite economic headwinds.