Reasons why big companies/banks/insurers hesitate to partner with FinTechs - and how can FinTechs deal with this.

The India tech stack presents a unique inflexion point for FinTechs. Comprising seven technologies (Aadhar, UPI, DigiLocker, eSign, OCEN, ONDC and the upcoming ULI), it broadly enables mapping 3 flows digitally : flow of money, flow of information and flow of product/service. Synergising them enables flow of decisions by all stakeholders involved in each transaction - securely, instantly and at a fraction of the cost.

This stack - also called digital rails - can be akin to jumping evolution from landline phones to? smartphones, bypassing pagers and feature phones. And is powering Indian financial landscape to rapid growth.

In the financial architecture of India, the regulators chose the layered financial structure of banks and insurance companies being at the core, with FinTechs and other entities partnering with such banks/insurers to facilitate delivery of products/service. This means that FinTechs have to not only develop their products, but also convince banks/insurers to partner.

Now that is easier said than done.

Having worked in large Banks, NBFC’s as well as Life and Composite insurance companies, where I have been privy to how decisions get taken when evaluating FinTechs for partnerships, I can say that the first thing FinTech founders need is patience : the sales cycle will be at least 6 months long, if not more.

FinTech founders need to understand the reasons why large banks/insurers hesitate to partner with FinTechs. Some of these hurdles are :

• No single decision maker : often the CTO or CMO would see the benefit of business growth, and the COO would see the ease of process, but the CFO would express lack of budget.
• B.A.U. (Business As Usual) : the day to day work is so overwhelming that the decision makers are unable to find time to evaluate and push for partnering with the FinTech provider of a new technology.
• Fear : what if the new FinTech fails ? Will I lose my my promotion/increment/bonus - or worse, lose my job ?
• Inertia : why should the managers/decision makers stick their neck out to try something new when existing things are not broken. This resistance to change is often the reason why large banks/insurers are unable to build such innovative technologies in-house, inspite of having big tech teams and deep pockets. Recognizing that HDFC Securities has been unable to build the technology to enable its customers to invest in US listed securities, it wisely chose to partner with Stockal.
• W.I.F.M. (Whats In-It For Me) : those who can make/influence the decisions often are driven by personal incentives of promotion, bonus and recognition from their own bank/insurance companies. This can be a powerful tool to find your ambassador within the prospect company.
• Cost : The purchase committee will surely ask the cost-benefit equation.

There are two main ways in which this process of partnering can be speeded up.

A compelling Value Proposition : assumes that the technology offered by the FinTechs is so superior to the current technologies that banks/insurers use as to give a significant jump to their business - or reduces their costs of operations significantly, or strengthens their security & compliance significantly. Such a powerful Value Proposition if crafted and communicated well, can become a compelling driver of decisions within the bank/insurer. Clearly defining and communicating the varied benefits to different decision influencers and gatekeepers within the target bank/insurer is the key. Facilitating STP lending by banks to millions of unserved street vendors leveraging the India Tech stack and PM Svanidhi or PMAY can be a good example to find your Fortune at the Bottom of the Pyramid; similarly, enabling seamless loan syndication by DSA’s for corporate loans or enabling seamless securitisation of pools loans / CLO’s could be other such examples.

A comprehensive program : The second way is to build a dedicated team that targets specific banks/insurers and not only consistently follows up, but understand who are the key decision influencers, which hurdles are at play, and how to handle them. Again, clearly defining and communicating the varied benefits to different decision influencers and gatekeepers within the target bank/insurer is the key. In Citigroup, I saw the FinTech provider successfully identified the CEO to be its best decision influencer and ambassador within the bank to champion the new technology - it also helped that he was the boss. Further, FinTech may need to offer out of the box solutions to create stickiness in the partnership viz. part ownership and cross shareholding. TCS has a vertical called COIN where it takes a small shareholding in such tech startups; Max Life and Axis Bank took the cross shareholding route with their bancassurance partnership - such structures help build better synergies and stickiness, channelises ALL business from the bank/insurer to the FInTech, but has the downside of not being able to partner with other banks/insurers - so assess your SWOT deeply, and decide on the trade offs involved in taking the shareholding route.

Bottomline : B2B selling has always been hard - in FinTech space, it is more so. But not impossible if done methodically, comprehensively and consistently.

The author is a co-founder of HubCredo, which helps B2B companies build such comprehensive programs, craft value propositions and orchestrate demand engines.