So you want to sell to banks?
By Anoushka Vaswani for VentureBeat
If you ask almost any early-stage B2B FinTech startup selling to banks what their biggest challenge is, the answer you’ll likely get is “sales.”
Although interest in FinTech from incumbent institutions has surged over the past few years, getting to initial pilots and contracts with banks is a challenging process for any early FinTech company. Many B2B FinTech companies will experience a 6-12 month sales cycle to get to pilot. After the financial crisis, banks have become more risk-averse, tightening their compliance processes, and startups often must navigate through multiple decision makers and legacy systems.
As an investor at Matrix, an early-stage venture capital firm, I spend a lot of time looking at FinTech. I wanted share some best practices from companies both inside and outside our portfolio who have had success in selling to banks, as well as from representatives at regional and national banks who make the purchasing decisions.
1. Find a champion
Find the individual at the right level within the organization who can endorse the product. This individual can help walk a company into places where there may be a back-and-forth conversation (about compliance, for example). At TrueAccord, for example, the full sales team is focused on identifying and reaching the individual who can champion the product. Every Friday, a group of salespeople and executives at the company will do a strategy session on the top accounts, and salespeople will voice the resources they need to move certain accounts forward, from investor introductions to additional collateral.
Successful sales teams also maintain a regular cadence with their champions, arming them with new, relevant information and providing details on their progress with other accounts.
According to an executive at a national bank, one of the biggest mistakes startups make is not keeping their champion updated on their progress: “I will sometimes make introductions inside the organization for a company and then never hear from them again. I want to know how the discussions are progressing and how I can help.”
2. Come prepared to educate the client and share your materials
FinTech sales often look different from a traditional enterprise software sale. “You are part consultant, part salesperson,” says Bill Ervin, the senior VP of business development, at Mirador. “We look for people with experience in banking or ERP software on our sales team.” Banks will want their vendors to understand their internal and regulatory processes. “We show our customers that we are not just a technology company but that we know the business processes and the industry,” says Brian Kneafsey, head of sales at Blend. On topics like blockchain, the conversations with banks can be half academic, half commercial.
Furthermore, banks will typically want a substantial amount of detail before moving ahead with a proof of concept (POC). In the initial conversation, coming equipped with collateral that explains the product and contains a detailed appendix can be helpful for a bank representative who will likely be sharing your materials with 6-7 other individuals. Over the course of the sales process, banks will often ask for details about the security of the platform, financials, and compliance. “You need to have all your ducks in a row. Banks will want to know exactly how you are doing things,” says Ty Bennion, senior VP of global sales at HyperWallet. “You need to be able to say here is my backup documentation, and anticipate potential questions about the offering.”
3. Articulate the project plan early
A traditional bank will often ask a vendor to talk to a number of departments before proceeding. These conversations may also be spread several months apart. Coming prepared for the initial conversations with a suggested project plan and playbook before POc can significantly expedite the process and increase a client’s confidence in the team. “Try to plan to work as much as possible in parallel paths,” Joe Gelbard, the Chief Revenue Officer of True Accord, advises. “When selling to a bank, you may have to speak to operations, vendor risk management, legal, and a number of other divisions, each of which take time. If you can coordinate some of these steps, it can significantly shorten your sales cycle.” It is important to be specific with timelines in a conversation without being pushy. Banks are often significantly more interested once they have seen the startup execute a playbook successfully with another bank.
Furthermore, it is important to ask questions about decision-makers, processes, and budget early in the conversation. “You want to ask questions early because it can be hard late in the game,” says Kneafsey at Blend. “There can be a lot of nuances inside a bank.” Understanding how products move successfully through the organization and getting the organization’s thoughts around the budget (e.g., is it an established budget? Given many banks will plan in advance, what year is the budget for?) can be incredibly helpful for the prioritization and forecasting of your pipeline.
4. Beware of scope creep
As more people from the bank’s side become involved in a project, many startups have experienced the problem of scope creep. As an early-stage company with limited resources, it is important to stay as focused on the core product as possible.
Often, having representation from legal and compliance as early as possible can help mitigate issues in these areas down the road. Aligning on the base requirements in advance and having the champion involved in the conversations can help prevent scope creep.
5. Align on the goals of the POC and try to limit the use of the bank’s resources
Banks are unlikely to invest significant time and resources into a POC. The less integration required, the faster the process can typically move. “We try to place the least amount of burden on the engineering team as possible until there is a firm commitment,” says Gelbard of TrueAccord. The first POC for an early stage company may not result in revenue. It is more important to find the right partner who is responsive with early feedback and can invest the right time and resources to make the product successful.
It is also important to have clear goals from the POC. “You need to agree on the KPIs before the POC so you can point to delivering them,” says Bennion of HyperWallet. Furthermore, many successful startups share a clear path with potential customers about getting from POC to live contract. This information can be documented in the contract, and some companies also offer incentives to prompt the bank to go live by a certain date.
6. Land and expand
This strategy has been successful for a number of FinTech companies. Some startups have adopted “light” versions of the product that may not have the same credit and compliance requirements. Others will try to get a portion of the bank’s business before aiming for a large contract. For example, TrueAccord asks a bank to provide it with a portion of the business it may be giving to other collection agencies to demonstrate the lift their product can provide. Other companies have gotten smaller departments live with their product, which has significantly eased the sales process with other departments within the company.
If you have any further thoughts or suggestions, please drop me a line firstname.lastname@example.org or find me on Twitter @anoushkavaswani.
Thanks to Ty Bennion at HyperWallet, Bill Ervin at Mirador, Joe Gelbard at TrueAccord, and Brian Kneafsey at Blend as well as the banking executives who contributed to this post.
First appeared at VB