In my 30+ years working in financial services, I have participated in the purchase of $100 million of financial technology. In the course of this, I interacted with many different kinds of software and hardware vendors. I was surprised at the ineptitude
of most of the sales efforts.
Now I consult to technology companies. So the shoe is on the other foot. I have come to appreciate that selling to banks is one of the most difficult challenges for a Fintech startup.
In this blog I will offer 5 ways in which Fintechs can sell more effectively to banks.
An overriding challenge is the completely different mindsets and perspectives of banks and Fintechs. Bank staff come from a complex, risk-averse, legacy environment. Technology companies are much simpler, and tend to be single-focused and agile. (See the
chart at the bottom of this post).
Here are a few points that add to the challenges:
- Getting yourself included for consideration. If you’re not a “household name”, this is an uphill battle. It is much easier for a selection team to work with known players.
- You are most unlikely to be able to sell to the economic buyer at a large or even mid-sized bank. You will be talking to an individual or team who will only make recommendations after following a preset process.
- You will almost certainly be in a competitive bidding situation. Larger banks generally require an RFP process or similar, even if you see your product as the only one that addresses a problem.
- The “vendor selection” team will have several preconceived ideas about what they need. They will "know" what kind of company they want to work with, and what they need to sell an internal business case.
- The selection team may have already decided informally who they think is the likely winner. Or they may have unspoken expectations that rule you out if you don’t know about them.
With these challenges in mind, here are a few critical success tips.
1. Make Sure You’re Solving the Bank’s Problem
You have great technology and lots of people have told you it’s a great idea and the time is perfect. But do you know what specific bank problem you are solving? Can you express it in banking terms? Have you validated it with bankers?
Many years ago I was part of a technology selection team for a new wire platform at a major bank. The established vendors assumed that our challenges and needs were just like all the other large banks. Only one vendor took the time to understand what we
really needed to move forward. They adapted their solution proposal accordingly. Even though they were the “new kid on the block” they won the business. This win set them on a path to become the premier large bank provider.
You can’t assume that a banking buyer will connect their problem and your solution. You have to help them to do that. In doing so you will also show that you understand banking. This is an essential prerequisite to selling to banks.
This means you need to:
- Do your research on banking challenges, or hire someone to do it for you.
- Listen actively, with appropriately knowledgeable probing questions. Use responses to zero in on the bank’s specific variant of the problem.
- Focus less on your technology and more on the bank’s bottom line
- Make sure you offer a complete solution, whether alone or in partnership with others. You need to show you know how to integrate your solution with bank technology and processes. The full solution will address customer service, compliance and operations
implications. And you will need to demonstrate ability to support installation and ongoing production.
2. Establish Credibility
It is hard being small. Banks are more amenable to talking to small technology providers today than ever in the past. But there is still a huge credibility barrier to overcome.
I recently led a search for a cross-border provider of lockbox services for a large bank. The range of banking knowledge brought to the table was almost shocking. I had to educate one provider on his own country's regulatory environment. There was little
chance he could advise us on cross-border implications. But one provider brought an ex-banker who had deep operational and regulatory knowledge. Guess which we were more inclined to work with!
The bank will want to know that:
- You know enough about their domain within banking to be able to partner with them effectively. They should not need to educate you.
- You have a solid enough business plan that they can count on your solution being around for the long term.
- You understand third party risk from their perspective as it relates to your domain. This will be especially significant if you are handling customer transactions or data on the bank’s behalf.
- You can help them with integration challenges (technology, operations, risk, etc).
3. Demonstrate That You Are Serious
You want to appear hungry but not starving. There are some obvious and not-so-obvious ways to do this.
- Ensure you bring your best people to the table. Engage consultants to fill gaps rather than coming with an incomplete team.
- Be flexible with scheduling, turn up on time and prepared. Ensure logistics for meetings are tested in advance, and don’t leave early. This is obvious, except that I’ve so often experienced vendors that don’t get these basic points of respect. The impression
they leave is that they don’t really especially want the business.
- Respond to questions, both inside and outside an RFI or RFP process, within the requested time. If there is a good reason, then ask for an extension as early as possible with a very clear reason.
- Respond to questions completely, concisely, and creatively. Look for opportunities to demonstrate your understanding of the bank’s business. Offer alternatives or extensions that will provide meaningful benefits beyond what they have requested.
- Take the time to research the bank’s specific place in their industry for this domain. Provide new insights on the market and regulatory challenges they face.
There is a balance, of course. You shouldn’t fawn over the bank team so much that they get the impression losing the deal would break you. You need to be serious, but you also need to show that you are stable.
4. Differentiate Your Value Proposition
Banking technology has always been competitive. With a couple of thousand Fintech startups added to the mix, the competition has become unreal.
It is imperative that you are able to articulate the unique value of your solution, simply, concisely and compellingly.
Too many times, I have seen vendors who are eager to show off how sophisticated, elegant or all-encompassing their solutions are. They may accomplish that goal, but I leave confused and unclear about what the value will be to me and to my bank.
Simple: present the problem, challenge or opportunity you are addressing in banking terms. Then show how your solution addresses it, as simply and non-technically as you can. The technical detail can come later, but the business solution must be crystal
clear to your audience.
Concise: you need to be able to describe your solution in just a few minutes. This few minutes should be enough to enable a bank executive to see why your approach is better than anyone else’s. You should be able to do this with no more than one or
two pictures or slides for the concept.
Compelling: you want your main target to go away thinking “this is the best solution for us – how can we make it work?” They should see the value of your solution so clearly that they focus on overcoming barriers to success. Otherwise, they will
tend to focus on the barriers themselves.
5. Partner with Banking Industry Experts
One factor that links all the previous sections is the critical need to understand the banking industry and your specific domain. This isn’t just a matter of general knowledge It means understanding industry trends and priorities. You must know bank culture
and organization, decision-making criteria and vendor selection processes.
When I was selecting technology for financial institutions, I expected (but usually didn’t get):
- Enough knowledge of my business that I didn’t have to educate my potential partner
- An ability to quickly grasp the business problem we were trying to solve. And the ability to clearly relate the proposed solution to the problem.
- Insights that I didn’t already know, relating particularly to the domain in which I was purchasing
- An understanding of what I would need in order to make and sell an internal business case for selection. As selection team lead, I only rarely had budget authority to buy. Sometimes I faced an uphill battle to sell a particular solution. This was especially
true if the provider was not an established incumbent.
- Insight and guidance on integration, testing, deployment and support of the solution
The most successful vendors had hired or partnered with deeply experienced banking generalists. These were people who knew their technology, but also knew the banking industry and the business domain in which they operated.
Fintechs Can Sell To Banks, If …
Sometimes it seems like you’ll never break through to the right people. If you do, you may struggle to convince them that your solution is the best for their problem, even if you know it is.
But if you are patient, take the right approach, do your homework, and engage the right partners, you can do it.
The good news is that when you have built a partnership and sold your first solution, more will follow. Bankers like to work with companies they trust, who have proven they can deliver.