How an integration partner helps fintechs and SaaS succeed in international markets

international expansion

Expanding into new regions means connecting with the software SMBs there use most. An integration partner makes it easy.

In 2021, fintech companies secured $132 billion in global funding, more than doubling the amount from the previous year. With the U.S. leading the charge with fintech funding—followed closely by Asia and Europe—many young companies are primed to expand their operations into international markets. Their drive should come as no surprise. By nature, fintech platforms—not to mention tangential products in the SaaS space—are designed for access and scale. Even so, expansion can be a complex undertaking. 

One particularly complex aspect of expansion is data integrations. As a rule, fintechs and SaaS providers rely on connectivity to their customers’ systems to operate. But the integrations that serve them in their home country aren’t necessarily the right integrations for foreign markets. As a result, they often spend undue time, money, and effort identifying and tapping into the platforms their target customers use locally. 

If you’re a fintech or SaaS provider considering expansion, collaborating with an integration partner will allow your business to offload some of the heavy lifting and focus your efforts on scaling sustainably and optimizing growth. 

Why integrating with local systems is a challenge

By the time most fintechs and SaaS providers are preparing to expand, they’ve already made a significant investment in the integrations that tap into their current customers’ tech stack. However, the typical SMB tech stack can vary greatly from market to market, making successfully expanding your business internationally a challenge. 

Oftentimes, expanding fintechs and SaaS providers will find that the integrations they’ve spent valuable resources building in-house aren’t applicable to the market they’re trying to enter. In the U.K., for example, 24% of SMBs use Xero for accounting. But in the U.S, QuickBooks is the preferred software for almost 50% of SMBs, with only 3.5% opting for Xero. In Australia, the scenario is reversed, with Xero controlling nearly 50% of that market. 

Because no one integration covers a viable percentage of the market in every region, companies expanding internationally have to invest more resources to tap into the niche systems they don’t cover—a disadvantage when going up against local competitors. 

The complexity of building integrations in-house

Not only is building in-house expensive upfront, but the ongoing maintenance required to support a fleet of integrations is costly in the long run. Here are some complexities to consider: 

  • Each new integration you build will surface data differently. For instance, in Xero, Bills are surfaced as accounts payable invoices. In MYOB AccountRight, they are surfaced as four different types of Bills. 

  • Adding new functionality to an existing integration requires updating the data model each time. Something seemingly simple as adding a new data type can increase complexity massively. 

  • Monitoring for errors is critical to ensuring an integration’s success. A buggy user interface or poor user experience can damage customer relationships and hinder your ability to expand into different markets. Getting ahead of these errors means implementing an IT telemetry process that can account for monitoring multiple integrations across multiple regions. 

  • You’ll also have to account for the unique behavior of integrations. For example, along with presenting data differently and using different fields, the way platforms like Xero and QuickBooks calculate tax data is also unique. 

Regional differences to account for

Another complexity of creating integrations when expanding into new markets is dealing with different regional practices and regulations. Take accounting integrations. Tax laws vary from place to place, and many accounting solutions that target a specific region are designed with local practices in mind. Successfully expanding your operation requires a thorough understanding of local tax law and the ability to design around variances in the following areas: 

Sourcing 🗺️

One of the main functions SMBs look to their accounting software for is keeping track of sourcing or where a sale is taxed. Origin-sourced sales are taxed at the location of the seller and destination-sourced sales are taxed at the location of the buyer.

NOMAD states ❌

In regard to sales tax, NOMAD states are a group of five U.S. states that operate without a local sales tax. 

Nexus 😕

A nexus describes a scenario in which a business has a particularly strong presence in a tax jurisdiction. A nexus comes with its own set of associated taxes and there are various types such as affiliate nexus, click-through nexus, physical presence nexus, marketplace facilitator, and remote seller. All impact sales tax calculations. 

VAT (value-added tax) 🧾

A value-added tax is a tax assessed on the value added to goods at each stage of production. Each business along the value chain receives a tax credit for the VAT they’ve paid. This credit is not extended to the consumer, making it a tax on final purchases. It is common in international markets such as the U.K.  

Because the above areas of regulation impact how a SMB calculates tax, they will impact how you design data models for the various integrations needed for a successful international expansion.

Building in-house and edge cases

If you do decide to build your integrations in-house, it’s important to understand edge cases and how they can impact your roadmap.

Edge cases are issues that only occur at the highest or lowest possible operating parameters and are one of the main resource drains of ongoing integration support.

As user-adoption increases, your engineers will discover more edge cases that need to be solved to ensure a consistent user experience. However, as they solve these issues, adoption increases, leading to new edge cases that necessitate new solutions.

This cycle is time-consuming and costly under normal circumstances, but when faced with a new market, it can hinder expansion efforts. Your in-house team will have to dedicate more time to solving increasingly complex edge cases, which negatively impacts the development of new product features.

Without an enticing product roadmap, it’s harder to compete in markets where competitors have already established themselves. That’s why, when it comes to entering new markets, many fintechs and SaaS providers choose to ally with an integration partner.

How an integration partner can help

Partnering with an integration expert like Codat addresses many of the pain points that accompany international expansion. Our business data APIs connect banks and fintechs to all the major accounting, banking, eCommerce, and payments platforms small businesses use, enabling them to build features that save small businesses time and get them faster access to capital.

Our data models are consistently updated and do the work of standardizing information for you. We also have a proven record of handling errors and edge cases swiftly, ensuring that your team is free to focus on what matters most—expediting your product roadmap and providing your customers with features that build value and create loyalty.

Get started today or contact a Codat specialist using the form below to learn how you can expedite your international expansion plans.