February 12, 2017
For many startup companies, specifically FinTech startups, signing up a financial institution (FI) as a customer or partner is the ultimate form of validation. You see other startups announcing these deals, but for whatever reason, you haven’t been able to find one for your startup. Maybe you can’t get a meeting or find the right person in the FI. Maybe you find the perfect person, you give them the perfect pitch, they see that working with you is going to save them millions of dollars yet still at the last minute; they hit you with the We just aren’t ready to move forward with this yet. It is both heart-breaking and infuriating. How can they not see that this is going to change the world?! Although it is easy to blame the person on the other side of the table, understanding why FIs say no is the first step towards getting them to say yes.
The banking industry is designed to keep innovation out. Maybe it wasn’t intentional, but either way, it is exactly what has happened. Take fictional Mary, a Chief Marketing Officer, for example. She has been having an issue getting elderly people to create accounts. She finds an awesome new startup that is offering a solution to help the elderly make their retirement money last. She loves the idea and she believes that it will attract the elderly. She builds a case for using the software and goes to sign her name on the proposal, but then all these hypotheticals pop into her head. What happens if it suggests the wrong budget and unintentionally causes the elderly account holders to spend all of their money? What happens if the startup fails tomorrow and our account holders can’t use the technology anymore? She knows that if the startup makes a mistake, she will be held accountable and her job may be on the line. On the other hand, if the partnership is perfect and results in an increase in elderly account holders, she will get nothing but a pat on the back and maybe a small bonus.
So how does a startup company convince a bank to sign the papers? Monotto has found that it is all about decreasing risk. You can help validate your product by getting into a well-known accelerator or putting a big name on your board but ultimately, the difference between a "no" and a "yes" is how comfortable a bank is with all aspects of your business. All companies working with FIs are going to have at least three types of risk that they will need to decrease:
Every startup will have to deal with those three risks and each startup will have additional risks that are specific to their business. Whether you are headquartered in a foreign country, your founders are extremely young, or you just had some really bad press, you will need to be prepared to help FIs feel comfortable with your company. As long as you have a plan for when these issues arise, the documents and answers you have to supply should reassure the FI and help you close the deal you have been looking for.