How Do Fintechs Harness Interoperability and Standardisation for Market Success?
Welcome to another chapter of our newsletter as we delve into the demand-side perspective, exploring the essential elements firms require to secure their market share. Join us as we unfold the intriguing narrative of how fintechs strategically position themselves to cater to the ever-changing needs of users.
Interoperability and standardisation, often referred to as forging common ground, are important perspectives shaping fintech firms. While brimming with innovation, FinTechs often suffer from fragmented systems and a lack of common standards. It hampers smooth data exchange, restricts customer access to a holistic view of their finances, and ultimately stifles gross transaction volume (GTV).
However, the winds of change are blowing. Interoperability initiatives, driven by standardised APIs and protocols, are breaking down these silos. As fintechs connect seamlessly, customers can easily aggregate accounts and access a range of products, pushing GTV upwards. Effortlessly orchestrating payments across disparate wallets and seamlessly transferring funds between traditional and digital banks unlocks new user possibilities and fuels a boom in financial activity, propelling GTV to reach its true potential.
Interoperability and standardisation are a common thread that binds the success of Uber, Revolut, Wise, and Remitly even though they operate in distinct corners of the fintech space. All four companies have benefited from the adoption of open standards and fostering seamless connections within their respective ecosystems.
Uber boasted the highest GTV among the four; its growth from 57.9 billion in 2020 to 115.4 billion in 2022 can be partially attributed to its embrace of open APIs. Uber allows third-party apps to integrate with its platform, offering riders more comprehensive travel options and increasing engagement. Though smaller in scale, Revolut’s 2020-2022 GTV trajectory (16.3 billion to 18.8 billion) reveals a deliberate shift towards interoperability.
Revolut has expanded its reach, attracting customers seeking a one-stop shop for their financial needs by partnering with other fintech companies and offering integrations with traditional banks. Wise saw its GTV climb steadily from 15.3 billion to 30.5 billion over the same period. The consistent growth can be attributed to Wise’s dedication to transparency and standardised pricing. It has built trust with customers seeking affordable and predictable cross-border transactions by eliminating hidden fees and offering clear exchange rates. As visualised in the graph above, Remitly witnessed a similar upward trajectory, with GTV rising from 12.1 billion to 28.6 billion between 2020 and 2022. The success stems from Remitly’s focus on streamlining the remittance process. Remitly has made sending money internationally faster, cheaper, and more accessible by utilizing standardized protocols and partnering with mobile wallets and local bank networks.
Although examining the gross transaction volume provides valuable insights into the overall expansion of fintech companies, it is not the sole determinant of their success. Beyond sheer transaction numbers, a driving force for these companies is the dynamic network of engaged merchants facilitating these transactions. To gain a deeper understanding, let’s delve into how interoperability and standardization operate on a practical level, particularly impacting the involvement and operations of merchants within these platforms.
Uber stands as a testament to the power of open APIs. It seamlessly integrates with restaurants and grocery stores, including pharmacies, allowing riders to order on the go and pay, which not only expands Uber’s user base but also creates a win-win for merchants, granting them access to a vast pool of potential customers. Revolut 500,000 merchants is a respectable figure compared to its size. Its focus lies on building a comprehensive marketplace where users can directly access goods and services through the app, which fosters a stickier ecosystem, encouraging users to stay within the Revolut universe for various needs, further boosting engagement and transaction volume.
Buzz Summary
These diverse approaches highlight the multifaceted nature of interoperability and standardisation in attracting and activating merchants. While Uber prioritises integration and scale, Revolut cultivates a closed-loop ecosystem, and Wise focuses on strategic partnerships. Regardless of the strategy, all three companies demonstrate how open standards and seamless connections within their platforms contribute to GTV and build thriving ecosystems where businesses and consumers can truly connect and prosper.
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