Expert tips for collaborating with a big bank
Strategic partnerships between fintech start-ups and the more conventional banks are becoming more prominent the world over. A 2017 study by PWC found that 82% of financial services providers plan to step up their partnerships with fintechs over the next three to five years.
There are good reasons for this trend; a mutually beneficial relationship can bring significant advantages to both parties.
Why is collaboration important to consider?
Entersekt is a provider of authentification and mobile app security to seven out of South Africa’s ten largest banks. CEO Schalk Nolte says that one of the key benefits of partnering with a big bank is the secure environment it affords to simulate new technologies.
“South African banks are global technology leaders, and this provides an exciting sandbox to test new technologies in our home market before considering taking it to other markets”, he says. Banks can also offer fintech start-ups invaluable insights into the regulatory environment as well as access to a significant client base with whom the bank has developed relationships built on trust, according to Nolte. “These facets combined with the innovative, can-do attitude and energy of a start-up is what creates the magic”, he says.
Okabeng Moepya, co-founder of Isazi Consulting, an artificial intelligence and optimisation company, agrees. His firm has successfully partnered with Wesbank and Youi (OUTsurance Australia). “Fintech companies often have great ideas which are informed by some identified need. Traditional banks have the existing customer base and governance, whereas fintechs have very little of either. Collaboration between the two can therefore lead to a symbiotic relationship”, he says.
He believes the most important outcome of such a partnership is the benefits it results in for the end-customer. “Collaboration between fintechs and traditional banks is one of the key ways to get a better service offering for the customer”, he says.
The keys to success
So how can you go about finding, partnering with and benefiting from a relationship with a well-established, traditional bank? Our experts have the following advice.
Identify the right partner
“Choosing the right partner is crucial. As a rough guideline, keep an eye on the press for who announces new products in collaboration with vendors”, says Nolte. This can be a good indication of a general willingness to look externally for solutions, which could work in your favour. Dov Girnun, founder and CEO of Merchant Capital, an alternative finance company specialising in cash advance products for retailers, believes a good approach is to pursue partners whose existing clients are your target market.
“What has worked for us is going after a strategic partner who could bring us ‘one-to-many’. In other words, we identified potential partners (‘one’) with ‘many’ sweet spot clients, who are also our target clients”, he says. Merchant Capital has formed successful strategic partnerships with Standard Bank and Discovery Insure.
Articulate the mutual benefits
Once you have secured a meeting with your preferred potential partner, you need to be very clear about what each side stands to gain from the collaboration.“As in any relationship, both parties need to benefit”, says Moepya.
Girnun is of the same opinion. “The most crucial element in finding the right partner is identifying those that can benefit as much from a relationship with you as you can from them — in other words, ensuring a strong mutual value proposition”, he says.
He also points out the importance of being disciplined in your approach to choosing the right partner. “We focused on removing any subjectivity from the process by building an objective ‘partner scorecard’ that allowed us to weight certain attributes of the partner (such as a large client base, deep client relationship and mutual value proposition) with what we could offer them. This empowered us to make educated decisions”, he says.
Understand the bank’s operational position
In order to truly understand how your partner can benefit from a relationship with you, you have to know exactly how the bank operates.
“Understanding how a bank works and what that means for you as a start-up in terms of resources and structure for example, is critical”, says Nolte.
Knowledge of the procurement process will be invaluable, according to Moepya, who also highlights the merits of ensuring a cultural fit.
“The key aspect of collaboration is managing the pace at which the ideas/products are tested and implemented. Banks have very complex structures and procedures which can hinder the rate of innovation. Fintech companies are very agile and want to move very quickly to get first mover advantage. Blending these two cultures/philosophies can get very tricky”, he says.
The more aligned your cultures and philosophies are, the easier this aspect will be to manage.
Find an internal champion
To get your foot in the door at a big organisation, you need to make contact with someone who will champion your proposition.
“A bank is a very large organisation and getting connected to the right division or people is daunting”, says Nolte. “Navigating your way through and getting stakeholder buy-in can be very taxing on an entrepreneurial business with limited resources”.
He recommends finding an internal champion to help find your way through the complexities of a large bank and to campaign to key decision-makers on your behalf. Girnun agrees. “If you don’t have an internal champion who is engaged and passionately buys into the partnership, then the initiative will most likely fall over and die”, he says.
But don’t expect a meeting with the CEO, he adds. “Start small, but use networks and referrals to help you secure the meetings you need to prove yourself”, he says.
Moepya has a slightly different stance and believes you should aim for connections with key decision-makers as this will enable you to get where you want to be far quicker.
Either way, it’s clear that finding someone internal, whatever their position in the firm, is a vital step in the process of securing a valuable collaboration.
Clarity of purpose
Proving yourself to a big bank that has limited time to spend with you and possibly greater perceived priorities than meeting with you is no small task. Focusing on the four key aspects suggested by our experts will go a long way to helping you achieve your collaboration goal.