Why are Financial Institutions hesitant to partner with tech providers?
Many SME financial institutions, banks, credit unions, and coops know the vast opportunities in today’s profound digital transformation
They understand change is inevitable. They need a modernized platform to enhance back-office efficiency and realize they must cater to a new generation of mobile/digital/social-first customers who demand a better customer experience.To cater to this market need, banking transformation providers are developing products and services that are superior, affordable, and scalable with explicit success stories. So why do they hesitate about collaborating with competent technology vendors? Why do vendors have longer sales cycles? Let’s delve into this.
- Mindset: Legacy organizations are built around linear, brick-and-mortar models over decades. This creates a conservative, risk-avoidance mentality, and resistance to change that underpins it. Senior management (CXO) would like to invest in tools for long-term success. However, mid-level management may be hesitant as they are under pressure to achieve quarterly targets – they view the effort in moving ahead as too daunting. For operational teams, day-to-day banking chores make it challenging to commit to more than they handle. When a bank does the legwork to learn more, there is much diversity and options in what each company specializes in. Comparison, floating an RFP (public tender), meetings, short-listing, and negotiations take time.
- FUD & FOMO factors: When people face uncertainty and doubt, they tend to ‘wait and watch or make decisions based on fears and emotions rather than facts. This psychological phenomenon affects decision-making—for example, selling stocks during a market crash or buying insurance policies they don’t need. Fear of missing out (FOMO) is another factor, where one impulsively buys (or decides not to) so they don’t miss out or adopt something because others are doing so – even if it’s not a right fit. Financial institutions are not immune to this. Over this, they are inundated with mixed messages, market hype, jargon, and information overload, making distinguishing between the noise and signals challenging.
What should tech providers do?
As a result of this, solution providers must take a different approach.
- Earn trust. Most sales revolve around hitting targets. Instead, solution providers should first concentrate on developing relationships with prospects. Function as an advisor, then as a pre-salesperson. Understand the bank’s requirements, challenges, what excites them, what troubles them, and roadblocks that prevent them from progressing. If the transaction happens too quickly — before trust is developed, the project will hit a bumpy road. Instead, give strong customer referrals and case studies to help them make an informed decision.
- Focus on small wins: Shift focus away from making the ‘big deal’, ‘selling the vision’, and ‘end-to-end digital transformation’. This can overwhelm the decision-makers, requiring a leap of faith as its higher risk, time, and costs. Instead, offer “bite-sized”, specific solutions that address a particular business need and produce a quick return. They prefer this over engaging in internal bureaucracy, sanctioning large budgets spread over the years. Another benefit is that it can be decided and implemented faster than a broader solution. Such incremental sales, small wins will add up and create more possibilities over time.
- Focus on USP: If a firm needs a solution that the vendor does not specialize in, don’t continue or hard sell. A square peg will never fit into a round hole. Trying to be everything to everyone never helps. Clients prefer a best-of-breed approach that is specialized and focused. For example, Bankingly is built for SMEs and the average time to implementation is under eight weeks, which is a great selling point.
- Set expectations right: Don’t oversell or hype it. A banking solution is not downloaded from an app store. Setting outcomes relevant to their role is critical. Keep it transparent from the start, and discuss pros, and cons, including ‘what if’ scenarios. Many deals fall by the wayside because of hidden costs and surprises.
- Propose a pilot: Before going all out, offer a feasibility study or pilot or propose a minimum viable product. It’s also called ‘Proof of concept’ (POC), i.e., implementation done on a small scale, to show whether a specific concept will work, how it can be done and what needs to be improved before scaling it up. This minimizes risk for all parties.
With the right approach, both the financial institutions and technology providers can score a win.