How to Get Banks to Work With Your Startup

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:

  1. The risk that the technology won’t work correctly: If your product is already being used by another FI, point out the success. If you still have a new product, the best way to make the bank feel comfortable is validation from an outside source that is trustworthy. The best way to get this validation is to have them introduce you to someone to test it. This introduction can give you validation to the third party because a bank is introducing you and can help close the deal, assuming your technology actually does work.
  2. The risk that the company will go under: Everyone knows that the majority of startups don’t make it. Pair this knowledge with the fact that a failed partnership can cost the FI a tremendous amount of money and it becomes apparent why they are slow to trust startups. The easiest way to show you are here to stay is by sharing how amazingly successful your huge multi-million dollar funding round was... However, if you are like most startups, you will need to get more creative. If you are in the position where you have to prove that you will survive, it will help if you explain your financial situation to the FI. Show what you believe the next couple of years will look like and show how you will still survive even if all of that doesn’t happen. Proving you are prepared for the worst is always helpful. If they are still worried about the company folding and you are desperate to sign them, consider agreeing to give them ownership of the code if the company folds during the contract. Get creative to be sure they will have success no matter what happens.
  3. The risk that the product doesn’t make sense to them: Okay, admittedly, this is a tough one as it makes up most of the sales process. Showing a demo really helps the FI see what the product will actually look like when it is live. If you are able to create one, a case study will help the FI understand how the product already has worked for another customer. If you don’t have a case study, creating an excel document that can help estimate the return for the bank can really ease fears and even create excitement, as long as the numbers going into the calculation are reasonable. Aside from the numbers, you just have to sell how well the product will work for their FI.

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.