How to Build a Market Map - The Fintech Edition
Market Sizing, Drivers, the Value Chain and Opportunities All Go Into a Comprehensive Market Map
Market maps are high-level views of what is happening in a vertical. They can be used to present a quick overview of the size, the trends that are happening and of the main types of companies in a space.
They are a good introduction to a deeper dive into a market - whether for market entry decisions, due dilligence for M&A or allocation of Vc funding to a particular vertical. They tell you where the largest opportunities are and you can use them to brainstorm market entry positionining and product options.
There are four parts to a market map:
Market Size and Forecasts (+ Geographical Segmentation)
Drivers & Trends
Value Chain and Its Constituents
Opportunities and Top Players for each part of the Value Chain
Market size refers to the revenue of all the players combined and the forecasts depend on the length of the product lifecycle in the vertical. For example, for consumer software verticals with frequent updates (e.g. browsers) a 2 to 3 year forecast is most useful, while B2B verticals look 5 to 6 years ahead, due to the slower sales and adoption cycle in Enterprise. If hardware is involved, or for heavily-regulated industries, forecasts periods will stretch even longer because the market landscape is more predictable.
Drivers are singular events that alter the dynamics in a market and trends are the follow-on effects that ripple through most, if not all of the value chain. Drivers can be emergence of new tech, or consumer shifts in product usage or expectations thereof. Looking at the political, economic, social, environmental and legal landscape in an industry will also highlight drivers and trends.
The value chain can have more than 3 types of players and you can segment it more granularly in the section that you are most interested in. At the high level, identifying 3 to 5 types of companies is most useful.
Here is an example of a market map for payments, with emphasis on the fintech opportunity.
It’s a space that amounted to US$2.1 Trillion in 2021 and is expected to grow to US$3 Trillion by 2026. North America made up US$0.5 Trillion in 2021 and will grow to US$0.8 Trillion by 2026.
There are four drivers affecting the space:
High inflation and interest rates, which have contributed to the decline in fintech valuations we’ve experience in 2021
Geopolitical tensions, which are increasing the fragmentation of the global payments system
Rise of digitally-native and socially conscious consumers, who are comfortable with and wanting modern, instant payment solutions
Decline of cash usage, accelerated by the pandemic, which grew e-commerce and credit and debit card usage
The main opportunity in payments in 2023 is for embedded finance products within the customer purchase journey. Online retailers, fintech providers and banks all play a role in growing the space.
For retailers, the opportunity is in creating a more seamless, light purchasing experience to boost basket size. Fintech providers can build more differentiated products for paying and lending for consumers and small and medium businesses and to evolve existing anchor products into full-service platforms. And banks are developing Banking-as-a-Service products to support embedded finance and provide risk management and compliance guidance to fintech companies.
I hope you enjoy diving into markets as much as I do. If you have business or product strategy questions you’d like my help with, drop me a line.