American banks are emerging from one of the most challenging decades for any industry in history, and one area that is showing a potential way forward is payments.
Leading banks are discovering that they are not necessarily diametrically opposed to new institutions. Partnerships with innovative technology companies can help strengthen payment systems, all while providing the benefits needed to retain and attract new customers.
It’s not easy. Banks are large institutions, with thousands of employees, many of them with different priorities and immediate needs. Building strong bonds between institutions requires patience and an understanding of what motivates them to move forward.
This trend comes at a watershed moment. The combined effects of the losses of the financial crisis, along with increased regulatory and shareholder scrutiny, means that banking institutions today are radically different than just a few years ago. Interest rates remain low, margins are nearly non-existent, and new competition has emerged in the form of nimble startups not burdened by legacy issues. This is in response to increasing consumer demand for niche services with innovative user experiences.
The banks can either perform or perish.
I offer four pieces of advice for banks to offer better payments services to their business customers:
Understand their problem. Payments or other fintech providers sometimes make the mistake of starting with a problem they have to sell. This is both understandable and misguided. Do research to find an area where an organization has a pain point with customers, or is not offering something a competitor is. Find the point of intersection where all benefit — the bank, the client and the provider. Then create a simple presentation that easily explains how you can solve this issue together.
Make the right approach. There’s not one perfect place to start a relationship — there are several. A conference is an informal setting, where there are pre-set mixers for different companies to meet. A crisp email or LinkedIn message to the Vice President of Product at a bank may also be an excellent way to begin.
Create multiple points of contact. Banks are large and ever-changing. Don’t bet everything on a single person, because that person may move or be placed on other projects before your relationship can be established. To change opinion and build a truly stable relationship, your team might need to meet people in different geographies and levels of the organization. Twenty or thirty contacts isn’t an unreasonable expectation at a larger bank.
Solidifying the relationship. See the institution as an extension of your own team, and you will be in good shape. A smaller fintech company should treat the partner like any other highly valued employee. Let the partner know when it’s performing well, and be upfront and honest if it isn’t. If you do so, they will return the favor. If a partnership doesn’t make your business stronger, faster, or more efficient, it’s a waste of your time. More often than not, however, these relationships with large banks, if managed well, are crucial to a smaller provider’s early growth.
When discussing the relationship between banks and startups, I sometimes use the analogy of an aircraft carrier and a drone. Both have a military purpose. The drone is agile and modern. The aircraft carrier can be hard to turn and takes longer to arrive at a new destination. But once it does, it remains the most powerful weapon in the fleet. By working together, the drone and carrier, the startup and the financial institution can be a strong weapon against the uncertain forces in today’s payment landscape.
Tanya Plotnikoff is Viewpost's chief experience officer.
