Treat expanding into the U.S. as a major strategic initiative, because it is

It’s always great to find a fellow nerd. Recently, I had the chance to nerd out with Reggie Young of Lithic on the Fintech Layer Cake podcast about all things related to U.S. market entrance for foreign fintechs. You can listen to the full episode here (and you should), but if you’re pressed for time, here are a few highlights.

The Why

The U.S. market is extremely attractive because it’s:

• Very large

• Highly profitable

• Financially sophisticated

But it’s also one of the most complicated markets from a regulatory and operational perspective.

The Oops

Many companies underestimate how different the U.S. regulatory system is. Common mistakes include:

• Assuming a single national regulator

• Misunderstanding the high cost, logistical challenges, and inherent limitations in pursuing a state license strategy

• Underestimating compliance costs (both initial costs as well as recurring/ongoing costs)

• Failing to understand why the bank partnership model exists in the U.S., and how it works

• Assuming an EMI license will get you principal card membership or that it is equivalent to a U.S. bank license

Companies must adapt their product and compliance model to U.S. rules.

The Partnership Model

The bank-partnership model allows fintechs to launch faster because:

• The partner bank already has regulatory approval.

• The complicated decision tree of which license(s) to pursue is significantly simplified, or can at least be delayed.

• The fintech can focus on the product and customer experience.

But a word of caution: this structure comes with responsibilities, as regulators are increasingly scrutinizing these partnerships.

The Challenges

1. Hiring U.S. Expertise

Companies need:

• Experienced GTM leader with a large network of potential clients

• U.S. compliance professionals

• Local legal advisors experienced in your specific area of fintech

2. Product Localization

Products must adapt to:

• Consumer protection rules

• U.S. payment rails

• U.S. consumer borrowing and repayment behavior

3. Cost Expectations

Entering the U.S. can require millions of dollars in upfront investment before reaching scale.

The Bottom Line

1. Start with a clear market thesis

2. Choose the right bank partner 

3. Invest heavily in compliance infrastructure

4. Hire local experts instead of trying to manage remotely

5. Plan for a timeline that is double initial expectations

Wanna dive deeper? Reach me at andy@klarosgroup.com.