When it comes to overall opportunity, the United States isn’t a hard sell.
The U.S. market is home to over 13,100 FinTechs, with some estimates putting the industry’s total value by 2030 at $1.5 trillion. For FinTechs eyeing expansion, the U.S. offers a $10.6 trillion card payments market — nearly five times the size of the European Union’s — alongside a $2 trillion payment processing industry. Unsurprisingly, many of the EU’s top FinTechs have already planted their flags stateside.
However, as Jim McCarthy, CEO of global payments processor Thredd, pointed out during a conversation with PYMNTS Karen Webster about entering the U.S. market, “Monetizing and scaling in the U.S. is a more complex endeavor than many realize, especially in recent years.”
McCarthy, who has experience at Visa and now Thredd, said one of the first challenges FinTechs often underestimate is the complexity of the U.S. payments and banking ecosystem. The U.S. market has become a proving ground for new FinTechs, many of whom struggle to navigate the web of regulatory requirements.
“There’s been a flight to quality, especially among BIN [bank] sponsors, and not all FinTechs are ready for the scrutiny,” McCarthy said.
The decision to expand into the U.S. market involves more than renting office space and adding a U.S. address to your website. As Webster unpacked in her conversation with McCarthy, whose own company entered the U.S. in March, and Kieran Draper, CEO USA of payment processor and embedded finance provider B4B Payments, FinTechs that are looking to enter the U.S. need to prepare for stringent regulations, tough questions, tougher conversations and hopefully an outcome that makes it all worthwhile. McCarthy said there are five issues they should expect to reckon with.
Fraud, risk and compliance remain concerns for FinTechs entering the U.S. market. Draper discussed the complexity of managing fraud, noting, “the fraud environment here is much more aggressive than in Europe.”
It was a high bar worth scaling for B4B Payments as it realized that entering the U.S. market required a heightened level of preparedness from payments partners, especially in an artificial intelligence (AI)-powered fraud detection landscape.
“You can’t underestimate the importance of strong fraud and compliance systems,” McCarthy said. “AI can be a double-edged sword if you’re not careful — both a solution and a vulnerability.”
Many FinTechs entering the U.S. market assume their existing fraud prevention systems will suffice. However, Draper said, this assumption is dangerous.
“The U.S. regulatory environment demands more rigorous fraud protection, and failure to meet these demands can quickly erode both profit margins and customer trust,” he said.
Chargebacks, disputes and compliance with network operating rules are other financial drains that can quickly add up if not properly managed.
FinTechs often overlook the different economics of the U.S. payments landscape. While the allure of profitability in the U.S. is strong, FinTechs must account for the hidden costs of compliance and local talent acquisition.
“The costs associated with compliance and customer service here are much higher than we anticipated,” Draper said.
McCarthy echoed this sentiment, stressing that FinTechs must recalibrate their business models for the U.S. market.
“Payment margins are thinner than FinTechs expect,” he said. “Compliance costs can quickly eat into profits, and those entering the market must adjust their go-to-market strategies accordingly.”
The U.S. regulatory environment is one of the most complex in the world, with nearly 60 different regulators overseeing payments.
“We knew about the complexity, but we didn’t fully grasp the impact of nearly 60 different regulators,” Draper said.
The potential to run afoul of these regulators is high, and the consequences can be substantial.
“Becoming bank-sponsor-ready is critical, especially in a climate where sponsor banks are increasingly risk averse,” McCarthy said.
Draper added: “Building regulatory compliance into your DNA is a must. This isn’t just about following the rules — it’s about making yourself an attractive partner to sponsor banks.”
Understanding the unique consumer behaviors in the U.S. is essential for FinTechs. While the U.S. is digital and mobile, it’s not mobile-first in the same way as other markets.
“Cards still dominate at the point of sale, and consumers want options,” Draper said. “They don’t want to be limited to just one payment method.”
This means that FinTechs entering the U.S. market must be prepared to offer a variety of payment methods, including cards, digital wallets and credit options.
“FinTechs need to meet customers where they are,” McCarthy said. “You can’t push a one-size-fits-all solution in the U.S. Consumers expect choice, and FinTechs need to be agile enough to provide it.”
Draper said customer service expectations are also higher in the U.S.
“Once you’ve onboarded a U.S. customer, they expect immediate service,” he said. “They don’t want to hear ‘no,’ and that can drive behaviors that can be difficult to manage if you’re not prepared.”
Legacy technology and integration requirements can slow a FinTech’s expansion into the U.S. Draper said one of the biggest challenges for B4B Payments was the time it took to get started.
“Everything took a tremendous amount of time,” he said. “We expected to be up and running quicker, but the U.S. market is different. There’s more complexity here, and things just move slower.”
McCarthy added: “The old adage of ‘move fast and break things’ doesn’t work in payments, especially not in the U.S.”
FinTechs must carefully choose their payments partners, ensuring they have scalable technology that can evolve with the business.
“If your partner is relying on legacy systems, you’ll quickly fall behind,” McCarthy said. “It’s critical to invest in modern technology that future-proofs your business.”
McCarthy said his advice to FinTechs eyeing the U.S. market comes down to preparation and securing the right partners.
“It never hurts to start with Visa or Mastercard,” he said, adding that these networks can provide resources and even financial assistance in some cases.
While FinTechs can easily find advice online, they need to be wary of bad advice that could steer them in the wrong direction, he said.
“Figuring out the good advice from the bad is crucial,” McCarthy said. “You don’t want to hear, ‘Just get started and figure it out later.’ That kind of advice will lead you down a dangerous path.”
He said focusing on compliance, reliability and finding the right BIN sponsor early in the process is important, as today’s regulatory landscape is cautious. FinTechs should take the time to align with partners who have proven experience navigating the complex U.S. market.
Draper’s advice echoed McCarthy’s sentiment and stressed the importance of financial resilience. The U.S. business environment can feel like a test of endurance, he said. FinTechs need to be prepared to deal with unexpected challenges, whether it’s regulatory compliance, employment issues or simply getting the attention of potential customers.
“It’s really important to take the time to understand what you’re getting into,” he said. “This market will test you, and success requires a deep understanding of the regulatory landscape and financial commitment. But in the end, it’s worth it.”
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