Fintech is opening up lucrative foreign markets to British businesses
Developments in financial technology are breaking down bureaucratic barriers and making it easier for small businesses to have a global presence.
The internet’s original promise of providing access to a global marketplace has been held back by financial red tape, but the tide is now changing.Rapid developments in financial technology (Fintech) are breaking down regulatory and bureaucratic barriers and opening up lucrative foreign markets to British businesses.
Payment software from companies including Stripe, PayPal and Alibaba is propelling this international expansion and allowing small British businesses to have a global presence that belies their size. One such company is cycling apparel retailer Always Riding, which sells its products in 14 currencies and five languages, despite only having a staff of five.
lways Riding’s biggest market outside of the UK is Japan and, currently, half of its sales originate from outside its home market.
“It is fair to say without the international business we probably would not be around,” says Always Riding co-founder Peter Harrington. “Really it is no longer international sales, it is just business because borders are now going.”
Harrington believes this borderless world is being enabled through software from the likes of Stripe, which helps SMEs navigate complex banking systems.
Zamir Cajee, founder of technology accessories retailer iQualTech, is accessing foreign markets through Amazon’s marketplace platform and PayPal’s payment services.
“Banks are fairly bureaucratic in general and when dealing with foreign institutions this becomes more complex,” says Cajee. “However, there are a number of providers that have emerged recently that provide elements of the banking system.”
This has allowed iQualTech to process foreign payments with relative ease, and helped to mitigate exchange rate risks.
Harrington says he would occasionally be on the receiving end of irate emails from customers hit by big foreign exchange charges in the early days of trading at Always Riding, which he founded in his parent’s garage in Derbyshire in 2008.
Problems arose because Always Riding was not previously able to allow customers to pay for products in their own currency.
As a result, banks treated any transaction as if it was a currency transfer and customers would end up being penalised with a charge for carrying out the transaction.
“We handle the cost now [through Stripe] and the customer does not have to worry about it or get surprised later on,” says Harrington.
Personalised children’s book company Lost My Name is another British business that is taking advantage of fintech to rapidly grow internationally.
Almost 90% of its book sales come from outside the UK and in two years it has sold 1 million books to consumers in 160 countries.
Lost My Name co-founder Asi Sharabi says the firm made the decision to sell its products worldwide from “day one and before we even knew if the economics would work”.
The nature of Lost My Name’s product means it can be produced in print houses spread around the world, which made the decision to distribute its product worldwide easier. However, the company’s ambition also left it with the headache of discovering the best payment provider for the market.
Lost My Name uses a combination of Stripe and PayPal to cover most of the English-speaking world, while it also uses iDEAL, Klarna, Sofort and Banko-contact in Holland, Sweden, Germany and Italy respectively.
“It was not straightforward but once you do two, three or four integrations [of payment providers] you get into the swing and find a rhythm,” says Sharabi.
However, Fintech firms are racing to create a one-size-fits-all solution across all markets.
“Nobody has got a universal platform to allow anyone, anywhere to sell to anyone else anywhere yet, but that is what we are working on building,” says James Allgrove, head of growth at Stripe UK.
While, for now, companies may need to rely on a patchwork of providers for full global coverage, the rewards far outweigh the hassle, and international consumers are clamouring for goods sold by British retailers.
PayPal research found the UK was the world’s third most popular destination for online shoppers as more than 86m overseas shoppers bought from the UK in the year to November.
Particular growth markets include Nigeria and India with 5.8m and 4.9m shoppers respectively buying from the UK last year.
Despite this large overseas customer base many small British businesses are not capitalising on the opportunity that international e-commerce offers.
“There are not many small retailers who are as on it as they should be in terms of e-commerce,” says Harrington.
He argues that it is not just fintech that is enabling international expansion, and factors including the growth of translation services and improved delivery systems come into play too.
Always Riding uses crowdsourced translation startup gengo.com to translate its website into four other languages, while shipping products abroad has transformed since it began trading.
“In 2008 we were manually writing out addresses,” says Harrington. “But now physically shipping the item is like a dream with connected systems and you are able to do things with a lot less manual work.”
Cajee says iQualTech’s international expansion has allowed it to leverage greater economies of scale by expanding volume of sales of individual product lines.
“This has led to reduced manufacturing costs that enables us to reduce prices to customers,” says Cajee. “We are now more competitive, which is leading to a further increase in sales domestically as well as internationally.”
SMEs need no longer fear expanding abroad because the necessary tools, which were once only within the financial reach of large businesses, are now at their finger tips.
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