Ask the expert: your questions on growing the business answered
FinTech Futures is introducing a new fortnightly column, Ask The Expert! The column is designed to provide readers with practical advice on how to grow their businesses.
Greg Watts is our resident expert. He is the founder of Demand Creation Partners, a London-based growth consultancy that helps fintechs and payment firms to scale. He was previously head of market acceleration at Visa Europe.
QUESTION: What are the main reasons fintechs fail, and how can I avoid them?
Despite constant headlines about the latest unicorns and multibillion deals, there are many times the number of fintechs that don’t succeed.
The most common reason for failure? Many fintechs are growing at such a fast pace that they overlook some fundamentals.
In this column, we’ll take a step back and look at the basic elements for success for any fintech – and indeed, any start-up or high-growth business.
A recurring theme for many fintechs is the ability – or often, lack of ability – to focus, whether that’s on a value proposition, target audience, competitor or creation of a high-achieving internal culture. An inability to focus often leads to mistakes, missed opportunities and failure.
- Research target markets thoroughly
It’s surprising how many fintechs don’t undertake thorough research to underpin their growth strategies. Research doesn’t need to take long or be expensive, but it needs to be done well. For example: What are the characteristics of your target markets or sectors? How do you prioritise which to enter?
Many fintechs have their sights set on the UK and the US, but they frequently underestimate the time and level of investment required to effectively compete in these mature markets. As a result, they often fail to make the impact sought by investors.
It’s better strategically to target smaller markets with high growth potential and lower barriers to entry, and then use that success to create powerful case studies that help facilitate entry into more established markets.
It may be worth, for example, starting instead with Central Eastern Europe or South American markets where mobile phone penetration is high, there are less barriers to entry, and where retailers and banks are looking for innovative ways to create digital payment tools that enhance the customer experience.
- Clarify your target customers and partners
Many fintechs target prospects too broadly, then get frustrated when their efforts yield few results. As a fintech, your customers will typically be retailers, banks, acquirers or other payment-related businesses.
Within retailers, for example, it’s vital to understand who you’re targeting. I sometimes hear: “We want to go after all retailers.” That’s an impossible task. How can finite sales and marketing resources pursue all retailers?
Clear prospect criteria is necessary to prioritise commercial efforts. For instance, does your solution help increase conversion or basket size – or both? Are you targeting higher or lower frequency purchases? Does your solution help every sector or just a few? Once you have these criteria in place, you can allocate weightings and tier prospects into groups.
Once agreed, your final target list should be visible throughout the business, with every staff member understanding who you’re going after and why. Marketing activities, from lead generation and PR to content creation, should be focussed on helping sales to get in front of targets. A good way to keep up sales momentum is to implement “command post” meetings focussed around the pursuit of particular tiers.
- Identify key stakeholders and buyer personas – then create messages that resonate
Where individual stakeholders are concerned, try to go beyond the C-suite to identify middle and senior managers who have influence over purchasing direction and decisions. For loyalty fintechs, these might include the head of loyalty or a senior marketing manager. In addition, reach out to support functions such as procurement and finance, which are often overlooked when it comes to building advocacy within a target client.
Once these stakeholders are mapped out, the next step is to create buyer personas. Understanding the goals and challenges of these stakeholders will enable you to create targeted messages for your contact strategy and marketing efforts.
Remember that your teams can help expedite the outreach as its likely some of these stakeholders will reside within their professional and personal networks. Make it a group effort.
- Demonstrate an understanding of your prospect’s business in the first meeting
One of the first things I ask a new client to show me is their sales pack. I do this because I want to understand how they pitch. Often, the majority of content I see is about the company’s business instead of how the company can help the prospect; why they should partner with them; and crucially, how much money they could make.
In the first meeting with a prospect, fintech representatives should demonstrate an understanding of the prospect’s business. This can be done quickly by looking at annual reports, LinkedIn bios and other secondary sources. It’s also an opportunity to validate your assumptions – for example: What are the prospect’s challenges? How can you help them? Why should they partner with you?
It’s amazing how a prospect will open up once they’ve seen you’ve done your homework. A little preparation goes a long way in establishing your credibility and creates an opportunity for ongoing discussion.
- Show them the money
Second meetings are the time to show prospects the size of the opportunity. This can be presented as a value model, using an interactive spreadsheet, which allows you and the prospect to have a conversation about how much they could potentially make.
For fintechs targeting retailers, there are often two considerations. The first is: How many more incremental (new) customers can they bring to the retailer? The second is: How much more will existing customers spend as a result of engaging with this new product or service?
Bringing it all together
If market acceleration is a priority, it’s imperative that a fintech knows its target market(s), clients, stakeholders and buyer personas – and frames its proposition in a way that helps prospects achieve their goals. Taking the time to do this will also better focus resources – leading to more impressive results.