Here are the 5 things I tell fintechs who want to partner with banks

This is is a syndicated post. You can find my original post on LinkedIn 2017-01-11

So you’ve got a billion-dollar idea that you think will revolutionize financial services? You’re not alone. Truth is, there’s no shortage of fintechs pitching “must-have” groundbreaking products to banks that never even make it through the bank’s pipeline. The ideas and products that they pitch are rarely the problem – the problem is that fintechs underestimate the complexity and the challenges that banks are faced with in order to protect and grow their business.

In order to meet banks’ needs, you need to first understand their priorities as well as their barriers to success. More than that, you need to share their business goals and vision. Here are 5 sales tips to keep in mind.

1. Cater to their business priorities             

It goes without saying that you need to express your value proposition in terms that translate to a business case for the bank. That means addressing at least one of their major business priorities. According to a 2016 study of banking executives, their priorities are as follows:           

  • Boosting interest income/loan growth.
  • Increasing spending in information technology and regulatory compliance.
  • Customer relationship management (CRM) and retail banking optimization.
  • Improving mobile and online channels.

2. Understand their challenges

Banks are faced with an enormous amount of challenges – most of them rooted in regulation and aimed at mitigating risk. These challenges and regulatory barriers have widespread effects on every aspect of their business. They spend so much of their time and their discretionary budget on being compliant and on building systems to keep up with requirements, that they have less time and manpower to carry out other initiatives.

You should be familiar with the following macro challenges and regulations that banks are dealing with, understand how they impact the bank’s decision-making, and ultimately how they will impact your business.

  • First of all, a prolonged low interest rate environment has put huge pressure on banks’ business models, making it harder and harder for banks to make money.
  • Legacy systems make it very hard to adapt to new technology and keep up with innovation. Moreover, replacement projects can be risky and costly – everything is riding on these systems. The risk of a system going down during a transition, even for an hour, could be devastating.
  • Recovery and resolution planning is critical to banks, and therefore critical to bank partners too. The ability to respond quickly to stress events and resolve any issues in a timely and orderly manner is paramount.
  • Cybersecurity is a top priority to bankers and regulators. Any security breach is categorically damaging to a bank’s brand (and possibly the economy at large). Banks are expected to adhere to unbelievable standards, so if you want to work with banks, your technology will be held to these standards as well.

This environment puts pressure on banks’ margins, makes them less agile, and limits their capacity for change. It also means they hold partners to a much higher standard with regards to risk and security. Ask yourself:

  • Is your innovation low-cost to implement?
  • Is your product built in a way that is compliant with bank infrastructure and technology?
  • Is it compliant with their risk models?
  • Do you have data security personnel to support the audits required by the bank?
  • If you’re working with customer data, is it safeguarded in a way that protects their customers’ information?
  • Do you have a disaster recovery process and an acceptable recovery point objective?

3. Put yourself in their shoes

Ping pong tables aside, fintechs and banks are fundamentally different, making for a sometimes uneasy alliance. But cultural differences can be tempered – thrive even – with a bit of empathy. If you look at the bank’s problems in terms of risk, financial, and reputational impacts, you will realize that every decision a banking executive makes has huge ripple effects. The burden of responsibility is great, so if they’re taking longer than you’d like to get back to you, just remember: these are smart people navigating large and complex organizations, trying to satisfy many vested and contrary interests. Paperwork is endless and roadmaps are long. Needless to say, setting anything in motion takes time.

  • Can your company withstand banks’ stakeholder pressure? That is, do you operate in a way that satisfies regulators? Will your product deliver a strong ROE for investors? Will it delight and safeguard customers?
  • Will your product be relevant in 3-5 years? Banks think in half-decades, not months or even years. Your product needs to be more than a trend.
  • Do you have a stable funding structure?
  • Can you stay afloat while you ride out the banks’ roadmap?

4. Do the heavy-lifting

From the initial pitch, to integration, and all the way to the final rollout and marketing splash, you need to bring more than an idea to the table. One of the challenges banks have identified when working with fintechs is that fintech vendors think that a good idea is good enough. Consider the following:

  • Can you demonstrate relevant use cases?
  • Have you built a product that integrates easily with their existing infrastructure?
  • Do you have a strong onboarding team to handle implementation?
  • Have you thought about how you will engage their marketing team? It’s hard to get cross-functional teams to work together on a project, but it’s imperative for adoption.
  • Have you established your KPIs? Helping shape these and providing the key data to your sponsors as needed will take a huge load off the bank.

5. Treat them like long-term partners

Your sales approach and your post-sale conversation needs to reflect this. You’re building a journey together. Your language and behavior should reflect a partnership, not a vendor-customer relationship.

Some tips for a fruitful long-term alignment:

  • Be your champion’s champion. Make their lives easier by providing them with the materials and playbooks they need to work with bank partners and move your idea up the line for approval.
  • Be personal. Encourage face-to-face meetings when possible. Identify with your bank contacts on an individual level.
  • Be proactive. Actively look for new ways to achieve mutually beneficial goals through shared actions. Encourage new ideas and seek joint solutions.
  • Be accountable. As far as your technology is concerned, always take responsibility for anything that goes wrong and immediately remedy the situation.