5 Tips for Startups Selling to Financial Institutions
In my previous role at a large financial institution (30,000 employees and multiple offices around the world) startups would often pitch their products / services, looking to partner with us or win our business as a customer.
Often we would see brilliant solutions that could potentially add a lot of value. However, also very often we would be prevented from moving forward with a partnership or agreement, for various reasons.
If you're a startup looking to sell to financial institutions, here are some tips that may help you.
1. Don't Put Customer Data in the Cloud
If your SaaS solution puts customer data in some unknown location that the bank has no control over, it's an instant red flag.
It's best to not even mention "customer data" and "cloud" in the same sentence - to do so will send violent shivers down the spine of the IT audit team, a group whose support you must have before any partnership takes place.
Large financial institutions take the security of customer data extremely seriously. One way to meet requirements in this area is your solution being deployable "on premise" - that is, within the the existing technology estate, storing data on corporate-administered data stores and within the institution's existing risk management framework.
2. Understand their Digital Strategy
Digital is a broad space and there will generally be a few specific areas under that banner that the financial institution is actively investing in or has KPIs for. I've seen organisations where digital is:
- A driver of new business
- A driver of cost reduction
- About data science doing clever things with algorithms
- About automation / going paperless
- About education and cultural transformation
And more. While many organisations will say that they see the role of digital as "all of the above" there will definitely be one or two that are a priority. Find out what those are and figure out how to position your product accordingly.
It is no point talking to people about cost reduction if all their KPIs are in new business generation.
3. Talk to More Than One Person
You might think it's logical to just work with one contact, but by doing that you risk the whole conversation stalling when that person goes on holiday, gets distracted, or shifts their strategic priority.
Meet with multiple business units, the tech teams, and demonstrate to all of them why you'd be an awesome partner to work with. Remember, it's entirely plausible that while one business unit doesn't see a need for your solution, another business unit sees it perfectly aligned with their KPIs.
Remember, it's entirely plausible that while one business unit doesn't see a need for your solution, another business unit sees it perfectly aligned with their KPIs.
Aim to win multiple supporters within a large organisation to really push the partnership or deal through. If you are unable to navigate your way to a key decision maker, the next best strategy is influencing those around the key decision maker to influence his or her decision.
4. Avoid Being Defined as Material Outsourcing
This may be different for other financial regulatory environments but in Singapore the Monetary Authority of Singapore has specific guidelines around what it calls material outsourcing.
Essentially, the MAS expects a set of more stringent risk management controls surrounding any outsourcing arrangement that can potentially have a material effect on the business or customers.
Why is this relevant to your startup? If you're going into a financial instution pitching an amazing solution that forms a critical part of their overall system, then your future relationship with them may be defined as material outsourcing.
This will require additional commitment in risk management overhead from both sides to adhere to MAS guidelines. Your sales cycle will get drawn out and delivery / maintenance costs will increase. Factoring in these additional costs and overheads, you risk the deal falling apart as the business case evaporates or people simply lose patience.
Factoring in these additional costs and overheads, you risk the deal falling apart as the business case evaporates or people simply lose patience.
If you're a startup, instead of going in head first trying to solve a big hairy problem, you might want to...
5. Start Simple
Try solving a small but meaningful problem for the financial institution. Something that doesn't trigger material outsourcing risk controls, and is fast to develop and deploy. The bank or insurance company is much more likely to partner with you on large initiatives if you have a prexisting relationship and have built up and battle-tested things like:
- Mutual trust / working relationship
- Risk management / audit controls
- Reporting framework
Good luck! Some of the biggest customer problems in the world are in the fintech space. Despite how the long sales cycles can make startups feel, always remember that financial institutions really do need to partner with startups if they want to evolve fast enough to meet the changing needs of their customers.