Henrik Rosvall says he thinks he's on to something with Dreams Technology, an engagement banking platform the entrepreneur co-founded that uses neuroscience and psychological tools to encourage consumers to adopt healthy financial habits. Bringing that vision to reality has involved courting bank partners far beyond its base Sweden, from the U.S. to Japan.
"I wouldn't say we have a great brand awareness, but right now we're out there talking to banks to build a presence in the financial industry," said Rosvall, Dreams' chief executive. "We do think there's a shortage of companies that offer these types of actionable financial well-being services, and we're getting out there."
Dreams, which launched in 2014, is setting up an office in Japan after receiving a grant from the Tokyo metropolitan government.
Dreams' technology, which operationalizes insights from behavior science to enhance emotional engagement and financial wellbeing of consumers, is now available in the U.S. — making Dreams yet another in the long list of fintechs and payment companies that are aggressively pursuing international markets, looking to disrupt local financial practices while diversifying revenue streams in a challenging economic environment.
To scale up, fintechs in Europe need to be able to expand beyond their home countries, reports
To chase more lucrative audiences, European digital payment firms like Revolut and Wise are building "super apps," which use an enrolled base of payment customers to cross-sell other financial services; and are moving into the U.S. to take on established banks and other digital financial services companies.
At the same time, U.S.-based firms like
These firms often influence their new markets, bringing innovations such as buy now/pay later and open banking from Europe to the U.S. and mobile point-of-sale technology from the U.S. to Europe.
"With firms like Adyen, Revolut and Wise, you see a level of innovation in payments that is [competitive] in the U.S.," said Kyle Griswold, a partner at FTV Capital, which invests in fintechs that offer payment infrastructure for international transactions. FTV also supports embedded finance, or the use of open banking tools to allow users to use one financial account to access services from other providers.
Buy now/pay later lending is a good example of where companies have influenced the market outside of their native countries, according to Ali Raza, a director in Protiviti's technology practice.
Firms like Klarna and Afterpay got their start in Sweden and Australia, respectively, and have expanded into the U.S in recent years, growing in popularity despite the recent earnings struggles of BNPL firms. That has pushed American payment companies and financial institutions to adopt BNPL, attracting
Trends can evolve as they move from one market to the next. BNPL was a mainstay in Latin America, and was digitized in Europe and Australia before coming to the U.S., according to Ali Raza, a director in Protiviti's technology practice.
"Credit cards in Latin America have had an installment component for years, and we're starting to see some of that here as Visa and Mastercard roll out card-based installment solutions," Raza said.
Additionally, a lot of U.S. payment innovations are exported, according to Raza. For example, Block (previously Square) was the first to popularize the ability to pay with a mobile phone or tablet, something that has now become ubiquitous internationally. "Globalization, technology, and universal consumer requirements for speed, convenience and security will continue to drive the migration of payments and payment form factors across markets," Raza said.
Building a dream
Dreams uses psychology and neuroscience to encourage changes in consumer behavior. Scientists from the fields of psychology, neuroscience and behavioral economics helped Dreams' founders build the company's model.
Dreams, which has traditionally operated as a B2C firm with about 500,000 customers in Sweden and Norway, recently launched a B2B product to white-label its service for banks outside of its traditional Scandinavian footprint.
The B2B unit is called Dreams Technology (Dreams Sustainable is the consumer product). Dreams' users pick a "dream" or a goal, and are encouraged to save in a way that's designed to be personal and emotional for the user. It uses
The company also encourages payments or financial habits that contribute to environmental, social and corporate governance goals. To build brand awareness in new markets, the company will work through banks and other financial institutions, having signed Mastercard and BNP Paribas as partners so far.
In addition to Tokyo, Dreams has also opened offices in Berlin, Paris and the U.K., and is approaching U.S. banks to sell its platform. "There's an opportunity there to use enhanced data and a bank's own product set," Rosvall said.
The nature of Europe, being a large unified market due to the EU — yet having cultural barriers between countries — encourages firms to ignore borders.
"Each country is smaller by comparison, there has always been more of an orientation for European countries to look abroad," Griswold said.
One stop
To build a one-stop location for a full menu of financial services, the U.K.-based Revolut has introduced several new products in the past few months as it maps out an expansion in the U.S. and other markets.
Revolut in September introduced one-click payments for online purchases, allowing the company to serve as an option in addition to mobile wallets and cards. Revolut is the second-largest challenger bank in the U.K, with 5 million users, according to the
In an earlier interview,
Revolut's other moves include launching
This could provide a way for Revolut to compete against those apps, as well as messaging apps such as Facebook Messenger, which support payments.
Large fintechs have spent much of the past year building financial services on top of their core digital payment products to serve businesses and consumers that may be cutting expenses by centralizing their financial technology relationships in a single location.
"Companies want to have a seamless payment experience, to work with a single fintech that can handle all of that traffic," said Sara Elinson, an analyst at EY Americas. "In a tough market, companies want to be able to work with a number of different payment methods, so they'll want a platform that makes them feel like they can use the card that they always use to drive sales and conversions."
The influence that a challenger bank or fintech can have outside of its home market is to push other firms to diversify as available clients look to shed financial relationships in favor of a single provider, according to Elinson.
The rush of payment firms to expand account-to-account payments in addition to card options is an example of this type of diversification, to provide as many options for international clients as possible.
"In parts of Europe, it's more common to use cash, debit or account-to-account payments, while in the U.S. it's more common to provide cards. So you can't come into a market with a preconceived notion," Elinson said.
Another U.K. fintech, Wise, has relied on its existing customers to build its recognition in the U.S. and other non-U.K. markets.
"Sixty-six percent of our customers come through word of mouth and not marketing," said Matt Brier, the chief financial officer at Wise, adding North American revenue in the past year has grown more than 57%. "We don't think it's worth launching anywhere unless we get good world of mouth," Brier said.
Wise, which was previously called TransferWise, partnered with
Wise in the past few months has additionally launched an integration service called
The way banks move money is slow and it's ripe for disruption.
Wise leaves space on its app for feedback, as well as tools that allow its users to connect with professional colleagues and friends, giving the company an ability to reach users in new markets where its brand may not be as widely known as in the U.K.
"The way banks move money is slow and it's ripe for disruption," Brier said. "If you make it as cheap as possible and super easy, people will spread that to others."
Helping out
Other fintechs are trying to build a cross-border brand by providing services to firms that aim to operate internationally. These fintechs can help their partners overcome language barriers and regulatory differences.
"Regulation is a big hurdle. The business we're in has involved getting regulated around the world so that others don't have to," said Terry Clune, founder and CEO of Transfermate, a Kilkenny, Ireland-based B2B payment company that has added offices in New York, Austin, Texas, and Sydney over the past two years.
The firm has transfer licenses in all 50 U.S. states and more than 200 countries, covering 141 currencies. It has continually developed its compliance network as a core service.
Transfermate looks for opportunities to "disrupt" markets in which transfers require multiple parties to handle parts of transactions. Its recent deals include an integration with Dallas-based delaware consulting, a firm that helps SAP's clients migrate to digital transaction processing in more than 20 countries.
These firms are operating in a slowing environment for technology investment. According to CB Insights, fintech funding dropped 64% year over year, with $12.9 billion raised in the third quarter 2022. This was the sector's weakest quarter since 2020, as the global economy moved toward a potential recession and investors deployed less capital.
Clune is betting on the slowdown in fintech funding to create an opportunity for firms that can centralize processes such as managing compliance in multiple locations, or reducing the risk of working with multiple third parties to process international transactions.
"Not having to have different relationships in different places to manage compliance eliminates a lot of time and funding," Clune said.
At FTV Capital, a team of experts consults with its portfolio companies entering new countries, aiding with go-to-market challenges such as headcount, marketing and compliance.
FTV's recent investments include WorldFirst, a London-based payment firm that supports money transfers for clients in the hedge fund and exporting businesses. WorldFirst offers own-currency payments and locks in rates for cross-border transfers, among other products. WorldFirst recently opened offices in the Netherlands, Japan and the U.S.
FTV also recently took part in a $200 million financing round in Paddle, a U.K.-based payment technology company. Paddle uses a software-as-a-service model to sell payment systems for companies that are expanding to new markets.
Another Dutch fintech,
PayU in September released a survey that found 48% of Americans have bought online from retailers based outside of the U.S., and half of those consumers did so at least one per month. The top international markets for U.S. consumers are Europe at 33%, Canada at 28%, Asia at 21% and Latin America at 21%.
The data suggests an opportunity for not only non-U.S. merchants, but also for payment companies that can provide support for merchants that sell internationally, across numerous markets.
"That's one area where the payments industry struggles, there's a lot of work that needs to be done to address different markets where the regulatory and payment methods can differ," said Mario Shiliaski, chief executive of PayU Global. A payment company that can support as many options as possible can attract merchants and also influence those merchants and other payment companies to diversify, he said.
