One of the most significant challenges for fintech entrepreneurs is how to successfully sell to financial institutions. Carey Ransom, the Co-Founder and Managing Director of BankTech Ventures, shared valuable insights on the complexities and opportunities involved in penetrating bank innovation departments during the Fintech Blueprint’s inaugural Office Hours roundtable.
Understanding the Mindset of Financial Institutions
Financial institutions, especially banks, are inherently risk-averse. They do not see themselves as technology companies, which can hinder their approach to — and willingness to adopt — cutting-edge solutions. When approaching these institutions, entrepreneurs must be aware of the traditional mindset that revolves around their core providers, like Jack Henry, FIS, or FISERV. FIs whose first question is whether a new technology “works with my core” may be revealing their lack of independent thought and innovative spirit.
Proactive Solutions for Entrepreneurs
Entrepreneurs must be prepared with proactive answers to address the concerns of financial institutions. Demonstrating how their solutions create value quickly and efficiently is crucial. At the beginning of their journey, entrepreneurs may need to underprice their products to attract early customers who can vouch for their value.
Articulating Value and Pricing Models
Being able to clearly articulate the value their solutions bring to clients is essential for fintech companies. Calculating the value and quantifying the impact on clients’ businesses can rationalize a price point that aligns with the value delivered. As entrepreneurs deliver more value over time, they gain the flexibility to raise their prices accordingly.
Agility, Waterfall Mismatch, and Case Studies
Financial institutions often have a conservative mindset when it comes to software development, preferring predictability over agility. Entrepreneurs should aim to work with this attitude by highlighting a crystal clear, virtually guaranteed ROI. The best-selling tool, of course, is a reference from another financial institution backed by concrete case studies that showcase the success of their solutions.
Embracing Innovation and Regulatory Support
It is crucial for both banks and regulators to embrace innovation and healthy change in the industry. With technological advancements, financial institutions need to seize opportunities for increased revenue and future viability. Regulators play a critical role in encouraging innovation within the industry, pushing banks to evolve, innovate, and stay relevant in the ever-changing landscape.
Responding to Challenger Banks
The rise of challenger banks poses a challenge to traditional community banks and credit unions that lack fully digital account opening capabilities. To stay competitive, community banks and CUs should prioritize adopting digital solutions and embrace digital solutions — from account opening to wealth management — to attract and retain customers.
Sales Strategies
Traditional cold calling is losing its effectiveness. Social selling, account-based marketing, and content marketing have become the current best practices for engaging with financial institutions and showcasing the value of fintech solutions.
Selling fintech innovations to financial institutions requires a deep understanding of the challenges they face and proactive approaches to showcase the value of innovative solutions. Entrepreneurs should embrace the perspective of their prospective clients, leverage POCs into killer case studies, and collaborate with partners to drive sales. By doing so, they have a shot at establishing themselves as valuable partners to financial institutions.
Next up: Sarah Hinkfuss of Bain Capital Ventures
Office Hours private roundtables are available only to Fintech Blueprint Supporters. These monthly events are held under modified Chatham House Rules. They are not recorded, nor are specific comments attributed to attendees without their express permission.
In August, we will meet with Sarah Hinkfuss, Partner at Bain Capital Ventures, to talk about Startup Stories that Work Now, only for Fintech Blueprint Supporters.
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