Customer acquisition cost in Mexico has risen fivefold, Southeast Asia has been reduced to a training ground: A Practical Guide for Financial Enterprises' Overseas Expansion
Go global or get out. This saying has been circulating in China's financial circle for several years, and it is now evolving from an "anxious slogan" to a "survival necessity". However, few people have clearly elaborated on the other half of the story: after going global, what will support enterprises to survive?
On the afternoon of October 17, the Smart Finance Research Institute and WEMONEY Research Lab held a themed sharing session at the White Deer Academy in Beijing, with the theme of "From 'Going Out' to 'Stable and In-depth Development': How Financial Enterprises Going Global Cross the Three Barriers of Compliance, Data and Localization". The four guest speakers came from law firms, traffic delivery services, cross-border credit reporting and front-line licensed practical operations respectively: Lian Weitao, Founder of the LANDY Law Firm Egypt Office; Li Chunjin, Co-founder of Yishi Cross-border; Wang Youhai, Managing Partner of Grand Credit, and a senior practitioner of global financial business. The meeting focused on four major topics: regional compliance, efficient customer acquisition, data risk control and business implementation, to help solve practical problems in the process of financial enterprises' global expansion. Business leaders from institutions including Shuohe Technology, Xinye Technology, Jaiin Fintech, Yangqian Guan, and Kuaishou Finance participated in the on-site exchange and discussion.
Through the sharing on that day, a clear clue emerged: the license determines whether the enterprise can enter the market, the traffic determines the maximum business scale, and the data determines how long the enterprise can survive. These three barriers are independent of each other but also mutually restricted, and none of them can be missing if the enterprise wants to achieve in-depth development.
01 License: The Truth of Market Access in Egypt, South Africa and Ethiopia
The first barrier for going global is market access, and the actual cost of access is often underestimated.
In North Africa, the first opportunity Lian Weitao saw was the huge market potential. Egypt has a total population of about 120 million, of which more than 50% are under 30 years old. The deposit and loan interest rates remain at a high level for a long time, and enterprises in the free trade zone only need to pay a management fee of 1% of the output value. These figures constitute a strong attraction. But on the other side of the opportunity, foreign exchange control is still in place, and capital transfer must rely on local banks and be equipped with compliance certificates in advance. "It is very difficult to convert the profits you earn into US dollars and transfer them back to China."
What is more troublesome is the flexibility of judicial practice. However, Lian Weitao raised a sharp question: "Why did you come here? You came here precisely because there are no clear rules. If everything is clearly regulated, will there still be opportunities for you?"
This is not only an explanation of opportunities, but also a warning of risks. The period of regulatory vacuum often brings the highest profit, but also the greatest vulnerability.
South Africa and Ethiopia represent two other types of market access patterns. The above senior global financial practitioner mentioned that there are seven or eight credit-related acts in South Africa, and the fee structure is split by the regulator into three parts: initiation fee, file management fee and interest rate, with the comprehensive annualized cost between 280% and 300%. It usually takes more than one year from applying for a license to issuing the first loan: about half a year for the license application, and another half a year for accessing suppliers. The national ID database of the Ministry of Interior, credit bureaus such as TransUnion, and the debit deduction channel all need to go through separate KYC processes. However, a mature regulatory system also means complete supporting facilities: the local credit reporting coverage rate exceeds 90%, the payroll card transaction records are open to institutions, and the priority of automatic debit is only lower than social security and tax. The regulator requires that the credit limit be calculated backwards based on the monthly disposable income, and the three core factors of repayment willingness, repayment ability and cash flow window are brought back to the core of business operations.
Ethiopia follows the logic of administrative access. As the first country in Africa to allow foreign capital to hold licenses to carry out online financial business, it has a huge untapped market, but there is no written law to follow. After obtaining the license, the enterprise needs to get approval from the supervisors of five departments of the central bank one by one, prepare the documents in accordance with the framework of Basel III, and the APP also needs to pass the anti-cracking review designated by the regulatory authority. The whole process from getting the license to starting the business took seven months.
02 Traffic: From Volume Buying to Scenario-based Operation, E-commerce Conversion Rate is 5 Times That of Pure Advertising
The second barrier is customer acquisition. Li Chunjin has been engaged in traffic delivery for 15 years, and has led the team to build local offices from scratch in the Philippines, Mexico and Moscow since 2021. She pointed out that the current customer acquisition cost for valid financial users in Mexico is about 50 US dollars, which has increased by more than 5 times compared with five or six years ago.
What is more noteworthy is a point she repeatedly emphasized: customer acquisition is no longer a single technical link, but the collaboration of four departments: traffic delivery, risk control, telemarketing and technology. Otherwise, it is very easy to cause a structural mismatch that the front-end customer acquisition cost is low but the back-end approval rate is extremely low, which will instead push up the overall comprehensive cost.
There is an easily overlooked trap in this industry: the volume buying cost and the effective user cost are two completely different statistical calibers. Advertising platforms settle accounts based on CPC (cost per click) and CPM (cost per thousand impressions), and their assessment indicator is traffic scale; while the risk control team focuses on the application approval rate and subsequent repayment performance, and their assessment indicator is traffic quality. Li Chunjin said that many institutions only calculate the advertising cost when making budgets, and when they find that "money is spent faster than it is earned", they have already burned millions of funds.
The solution she put forward is to integrate into specific business scenarios. The conversion rate from click to application on conventional advertising platforms is about 1.2%, while embedding into e-commerce scenarios can achieve 5 times of that figure, and the user's approval rate, repayment rate and credit granting performance are all better than those from pure advertising. This business model was first verified in Southeast Asia, and then replicated to Mexico.
The hidden cost of localization is also systematically underestimated. Her experience is that at least 20% of the global expansion cost should be reserved for human resources. "Things that can be done easily in China cost money locally, and the final total comprehensive cost will be surprisingly high."
In terms of regional selection, her ranking is very specific: the Southeast Asian market has a mature ecosystem and well-developed underground fraud industry, and it now mainly serves as a training ground for enterprises; Mexico is the best-performing market at present, but its growth is slowing down; Russia still has traffic dividends, and the ROI of advertising delivery can reach 1:8, far exceeding that of mature markets, but enterprises need to combine e-commerce scenarios for conversion to avoid the fierce local competition in direct online traffic delivery.
03 Data: Risk Control is Transforming from a Cost Item to a Revenue Unit
The third barrier is data, which is also a barrier that is hard to be noticed.
Wang Youhai, Managing Partner of Grand Credit, proposed a three-party model of "Bank + Credit Reporting Agency + Enterprise": the credit reporting agency provides data and verification, supports decision-making with analytical capabilities and risk control models, and the bank completes the closed loop of capital.
He observed a key transformation: "In the past, people thought that overseas risk control was a cost, and they tried to save as much as possible and avoid doing it if they could. Now they find that the money they saved may lead to huge losses." The reason is that risks no longer only come from customers themselves: it may be that the shareholders of supply chain partners or subsidiaries are sanctioned, resulting in the failure of capital return and the blockage of commercial documents circulation.
The pain points on the C-end are more primitive. In Africa, traditional credit reporting is basically unavailable, and enterprises can only rely on alternative data. Li Chunjin's approach is to build a combined model with national ID number, mobile wallet transaction records and operator behavior data. The key is to move the screening process forward: complete the screening before the user finishes downloading and registering, instead of completing it at the stage of network access and page jump; at the same time, considering the weak network infrastructure, the page should be designed as "the lightest one among all the global nodes".
This contradiction is more prominent in short-cycle products. The above senior global financial practitioner mentioned that when carrying out 7-day-term business in Mexico and Vietnam, the risk control model mainly relies on device fingerprint, SMS and APP behavior data. "A feature with an IV value of 0.07 or 0.08 is already considered very good", which means the correlation is extremely weak, and it is impossible to explain why this user is overdue. The resulting self-reflection is quite sharp: "Are we still doing financial business? Actually not really, it is just a simple arithmetic game."
The institution where the senior global financial practitioner works publicly displays all its member qualifications and licenses on the official website, directly shows its compliance identity during advertising delivery, and the post-lending performance has been significantly optimized: the bad debt rate is about 5%, and the collection rate after entering the debt collection process reaches 60%-70%. The analysis shows that in a market flooded with usurious loans and fraudulent Apps, the compliance qualification itself constitutes a user filter: it not only brings lower customer acquisition cost, but also better user group structure, lower bad debt rate and longer business operation cycle.
In the free discussion session after the meeting, the participating guests mainly exchanged views on the differences between different national markets. On the whole, the global expansion of financial industry has shifted from opportunity-driven to capability-driven. Mature markets emphasize rule-based compliance, emerging markets rely on pilot access and have high dependence on various data risk control measures. Financial institutions should prudently choose their overseas business development strategies in combination with their own positioning and resource base.