Martin Campbell, MD at FinTech firm Ormsby Street, has partnered with some of Europe’s biggest banks over the last 12 months. In this article he shares his learnings for other FinTech startups.
That some banks have struggled to adapt to changing customer demands in the digital economy is no surprise.
Many elements of traditional banking are in urgent need of disruption, and I doubt whether there’s a bank executive around who is unaware of that or is complacent about the need to adapt, no matter how long their own institution’s reputation has been strong.
It’s also no surprise to observe that some banks, rigid in structure, can be slow to change from within. That is why we are increasingly seeing collaboration with FinTech startups, as banks to look to deliver value and engage with their customers digitally.
A recent Tech City News article suggested that more than half (52%) of bankers expect to be working with digital partners in near future – if anything, that figure feels a little low.
But while collaboration with FinTech firms is a way in which banks can meet changing customer requirements, it isn’t all plain sailing, for bank or startup.
This is what we, at Ormsby, have learned so far:
1. Banks are big, bigger than you may ever have imagined
Finding and reaching an audience – access to market – is a challenge for many FinTech firms. As banks have ready access to hundreds of thousands or millions of customers, it is worth jumping through the hoops to work with a bank if it answers this challenge.
Make sure that you understand how a bank segments its customers, so that you know who to speak to and how to frame your proposition. Also, don’t assume that different elements of the bank will be in touch with others. Our experience in this regard has been good, but some banks are so big that internal communication can take a hit, and teams that should be collaborating often seem to be working in silos.
2. Banks are slow
Sales cycles in banking are measured in quarters, not months, and deployment cycles are similar.
This can seem ponderous if you are a digital company used to days and weeks. You do need to be ready for a big influx of customers, but you will have a while to prepare.
Also, there will be many hoops to go through with procurement, legal, compliance and more – so be prepared to keep slogging away. Furthermore, you’ll need to be aware that any new initiative needs enough resilience to make progress through the sales cycle despite multiple internal restructures, which can feel like they come out of the blue when you are least expecting it.
3. Banks are secure
Banks take security really seriously – and for good reason. The sort of data access that seems like the norm in the tech community is just not very common in the banking industry.
Even through open standards are coming along, standards like PSD2 are being adopted only gradually, so if your service depends on particular technology access, you’ll need to work hard to make sure it’s there.
You will also need to be aware of the other standards that the bank will need you to adhere to in order to accept the contract – this will include clauses on data ownership, and security audits, which will require oversight and compliance work from you.
4. Banks are open
Whilst banks can seem like a closed shop at times, the regulatory environment means that they are obliged to offer their customers equal choices (Treat Customers Fairly) and in certain cases, are obliged to send customers to outside providers if they can’t provide a particular product or service themselves.
This means that if you can find a good working arrangement to fit in with the bank, you’ll be able to join the ecosystem.
5. Banks are helpful
No, they really are. Banks are often portrayed in the press as being hard-nosed and profit focussed, and of course they are competitive businesses.
But don’t forget that banks ultimately benefit when their customers do well, and with all the bank executives that I’ve worked with, there’s been a genuine desire to help every customer that they work with in the most appropriate way possible.
So if your product can genuinely help a bank’s customers solve a problem that’s really causing friction, then you have something to get excited about. The bank will find a way to get round any problems that may have existed and you’ll suddenly find the road becoming much clearer – genuine product innovation counts for a lot