Tilting at Giants

In Miguel de Cervantes’ seminal 17^th Century novel, a delusional middle-aged man named Alonso Quixano becomes obsessed with chivalry and believes he is a knight named Don Quixote. Accompanied by his loyal sidekick, Sancho Panza, Don Quixote sets out on a series of misadventures, perhaps the best known of which is tilting at windmills in the belief they are giants. Throughout the novel, Don Quixote’s idealism clashes with the reality of the world around him as Cervantes explores the thin line between the power of imagination and madness.

Whether this is a good metaphor for CEOs I’ll let you decide! While hopefully not delusional, senior fintech executives certainly require a strong belief in their business when selling into large financial institutions. And whether you are a start-up, scale-up, or SME trying to make your way, navigating these diverse, complex, and political beasts in the hope that they will become your customers can be an unenviable task.

Perhaps the biggest mistake you can make is believing that having a great product is enough, when in fact it is merely table stakes. That can be hard to accept, but there are many challenges to overcome before you can slay your giant. From personal experience and discussions with fellow delusional CEOs, I share a few of them below:

1. The ‘So What?’ Factor – you may have a great product and it may solve a genuine issue, but how important is solving that issue to the customer? At any given time, an organisation is swamped with business, regulatory and organisational challenges, some of which are existential threats. Answering the question as to whether your solution moves the needle enough for an organisation to care is a critical first step.
2. Opportunity Cost – even if the answer to the above is ‘yes’, you will be competing against multiple projects for limited resources within your customer. It is important to recognise this and do whatever you can to arm your sponsors with the ammunition to convince other stakeholders that yours is the project to back.
3. How to Make Friends and Influence People – sales 101, but do you really understand the wider stakeholder group within the organisation? Large customers are typically matrix organisations and executives rarely have the autonomy to make unilateral buying decisions. It’s easy to become single-threaded through a key contact and find yourself blindsided by blockers from other parts of the organisation.
4. The IT Crowd – this particularly applies to the customer’s tech organisation. Justifiably they will want to understand the implications for bank infrastructure, support, system interoperability, or the impact on in-house projects. Having a good story as to why your solution enables internal teams rather than disenfranchises them can go a long way to overcoming the ‘not invented here’ concern.
5. We Are Not an Island – large financial firms have sprawling infrastructure estates supporting a multitude of functions across the front, middle, and back office. Some of their technology will be new, some proprietary, but much of it legacy. Ease of integration will be a major issue in the customer’s decision-making process, particularly if you are forcing change (e.g., your solution requires a specific database technology). If this is the case, you will need to have a very compelling story as to the business benefits of your solution.
6. Regulation and Compliance – the capital markets industry is highly regulated for obvious reasons. This places an additional burden on the vendor selection process. Even if regulatory oversight doesn’t extend to your solution, you will still need to enable customer compliance in areas such as resiliency, cyber security, data protection, or audit. Policies addressing modern slavery, anti-corruption, and diversity and inclusion create another layer of governance that fintechs need to adhere to. Embracing this early in the life of your company will avoid the nightmare scenario of winning a major deal only to fail vendor onboarding requirements.
7. The Tyranny of Time – large firms have complex decision-making processes and multiple stakeholder groups. Progress can be painfully slow and makes revenue and resource forecasting challenging for small vendors. The danger of long sales cycles is that things outside of your control can change – strategy course direction, key people leaving or changing roles, reallocated budgets, or an acquisition that buries the opportunity. Injecting as much pace as you can into the process (quick turnaround on questions, understanding the procurement process early in the engagement) and picking your battles carefully during commercial negotiations will help mitigate risk.
8. Are You Credible? – banks are often hesitant to work with fintechs, preferring established firms with a proven track record. Demonstrating credibility can be a Catch22 scenario; how can you prove yourself with a large bank if no one wants to be the first?  Not an easy one to solve, but perhaps establishing your reputation in a different segment of the market where the barriers to entry are lower and decision-making processes quicker might be a better way to build your reputation.
9. Secret Sauce – the capital markets industry is highly competitive and while your solution may provide cost or time-to-market benefits, customers are ultimately trying to out-compete their peers. This raises the question of IP control and whether collaborating with your firm drives product enhancements that quickly end up in the hands of their competitors.
10. Avoid Fishing Expeditions – a cottage industry of customer innovation teams, incubators, advisors, and conferences have grown around fintech. While some provide genuine value, others don’t. You have limited hours in the day so choose your engagements carefully. Does the bank innovation team really have any decision-making rights or authority? Is the professional services firm or global vendor really going to incorporate you into their product offering? Or are they just looking for free education?

Perhaps the most challenging aspect of dealing with large, global customers is knowing when to say no. As a small firm trying to show progress to investors or manage cash flow, you are susceptible to being pushed around by procurement teams. But getting the deal done at ‘all costs’ could be the worst decision you ever make. Knowing when to walk away from a punitive SLA or a one-sided commercial agreement can be the difference between the survival or demise of your company.

Despite these daunting challenges, collaboration between fintechs and banks can be mutually beneficial. It allows large organisations to stay competitive and offer innovative solutions to their customers while providing fintechs with the opportunity to massively scale their business. Hopefully, yours will be the story of David and Goliath rather than the sad tale of a medieval Spanish madman!