Selling Software to Banks: How To Win Deals in Tough Environments

Gaetano DiNardi
June 24, 2024

Selling Software to Banks: How to Win in Bank Tech Sales

Tired of sales cycles that take longer than building a vault?

The banking industry — the Fort Knox of tech buyers — is notorious for its caution and glacial purchasing speeds: lengthy cycles (think two years!), conservative mindsets, and numerous hurdles can leave even the smoothest salesperson feeling rusty.

But once you get to the bottom of how banks buy technology, their main challenges and value drivers, and their non-negotiables, you'll be armed to offer solutions that not only meet their standards, but exceed them, win their trust, and close the deal.

Challenges of Selling Software to Banks

Technology requirements for banks are so strict, that some 22% of banks opt to build their own tech stack in-house rather than buying the tools.

You will need to build a strong business case for your software and prove that it meets all the bank must-haves, from high-security standards to data backup and recovery to detailed audit trails, before a decision-maker in a bank says “yes”. Each step in the sales journey demands careful attention and tailored solutions that address specific pain points troubling your potential customer.

Let’s go through the key challenges SaaS companies face when selling software to banks.

Strict Security and Compliance Requirements

Banks and financial institutions deal with highly sensitive financial data, subject to rigorous regulations and compliance standards.

Your software needs to be "bank-grade" — extremely secure, reliable, and meet all these regulatory requirements. This can involve features like protection of data at rest and data in transit through industry-standard encryption algorithms, secure protocols like HTTPS and TLS, etc., or compliance with PCI DSS, GDPR, SOC 2, and other frameworks.

Long Sales Cycles and Complex Decision-Making

Banks are risk-averse; they prioritize security and stability above all else and will meticulously evaluate any software's potential impact on their sensitive data and operations before committing.

Like in large companies, sales cycles and decision-making processes can be lengthy and may take up to two years, potentially involving multiple stakeholders, from IT security to senior management — for around 50% of banks, even more than 10 people.

Each stakeholder may have their own priorities and concerns that need to be addressed: IT security teams need to assess vulnerabilities, compliance officers ensure regulatory adherence, and senior management weighs the cost-benefit analysis.

Legacy Infrastructure

Many banks have legacy IT systems that can be complex and difficult to integrate with new software. These are the workhorses of a bank, handling core functions like account management, transactions, and loan processing. Upgrading these systems can be a massive undertaking.

These older systems, while stable, can be complex and finicky when it comes to integrating with new software. This happens because of outdated programming languages and data structures or data silos, where information becomes inaccessible, disrupting workflows and defeating the purpose of implementing new technology.

Competition from Established Vendors

The financial software market is crowded, with large, reputable vendors whose names are synonymous with reliability and security in the banking industry. These vendors have likely built strong relationships with banks over many years, fostering trust and familiarity.

Also, the established vendors often offer a comprehensive suite of software solutions, catering to various banking needs. This creates a one-stop-shop mentality for banks, potentially reducing integration complexities.

Budget Constraints

While banks handle large sums of money, IT budgets can be tight. You'll need to justify the cost of your software by demonstrating a clear return on investment (ROI) in terms of efficiency, cost savings, or revenue generation.

Budgetary decisions also involve multiple stakeholders, from IT directors to CFOs. Each will analyze the cost of your software against the projected benefits.

Risk Aversion and Resistance to Change

Banks, by their very nature, need to reflect stability and security, which makes them inherently risk-averse, often hesitant to embrace flashy new technologies and software solutions.

A single data breach at a bank can have catastrophic consequences. Banks are understandably cautious about introducing new software that could introduce vulnerabilities in their secure systems.

At the same time, Implementing new software can disrupt established workflows and processes. Banks are wary of anything that could potentially prevent them from serving customers efficiently.

Inability to Sell Directly to the Economic Buyer

In many businesses, the economic buyer (the person who controls the budget) is the one who makes the final call about a purchase.

In large banks, however, the economic buyer (e.g., CFO) may not be directly involved in the financial technology selection process. As mentioned above, you may present to IT specialists, security teams, or department heads who will then influence the final decision made by senior management.

Because of this, the sales process may become even more complex, as you need to convince and build relationships with multiple stakeholders throughout the bank.

Unclear Organizational Structures

Banks often have departmental silos, so decisions might need approval from various levels within each department, like cybersecurity, data management, or IT sector, before moving forward.

Sometimes, there may be unseen stakeholders who significantly influence purchasing decisions. These "phantom approvers" could be senior advisors or regulatory compliance officers who can stall or derail the process if their concerns aren't addressed.

How Do Banks Buy New Technology?

While eager to embrace new technologies that can improve efficiency and security, banks usually have a very specific approach to procurement compared to other industries.

Below, we’re sharing the typical process for how banks buy new technology. These steps will help you understand the elements of their buyer’s journey and tailor your pitch and approach to successfully address all questions any stakeholder may have throughout the process.

1. Identifying Needs and Opportunities

The first step in a bank's procurement journey for new technology is all about identifying a specific challenge that needs to be resolved and external opportunities for improvement.

Banks constantly analyze their operations for inefficiencies and vulnerabilities. Common internal needs that can drive a search for new technology solutions include:

  • Fraud detection: Rising cyber threats and increasingly sophisticated fraud attempts can push banks to seek more robust fraud detection solutions.
  • Cybersecurity concerns: Data breaches can be devastating for banks, so they might seek new managed detection and response solutions to fortify their defenses.
  • Compliance hurdles: Constantly changing regulations can be a burden. Advancements in regulatory technology (RegTech) solutions can help automate compliance processes.
  • Operational inefficiencies: Manual tasks like loan processing or customer onboarding can be slow and error-prone. Banks may look for software solutions to automate these processes.
  • Insider threats: Employee access to sensitive data and financial systems creates a unique vulnerability that necessitates robust insider threat detection software.

On the other hand, banks may also recognize external opportunities for growth as they’re constantly looking for ways to gain an edge over competitors. Emerging technologies like AI or blockchain might present opportunities for innovation.

For example, a bank could identify an opportunity to use AI-powered chatbots to improve customer service and engagement, leading them to seek out relevant software solutions.

Also, various regulatory shifts can require new technology adoption. For instance, a new regulation requiring stronger customer authentication may prompt banks to explore new identity verification software.

How can your sales team fine-tune its sales strategy during this stage?

  • During initial communication with banks, identify their pain points. Are they struggling with a recent data breach? Highlight your software's security features. Are they swamped with manual tasks? Emphasize your solution's automation capabilities.
  • Stay updated on current challenges faced by banks in the industry. This allows you to proactively position your software as a solution to those specific needs.
  • Demonstrate your understanding of current trends and regulations in the banking industry. Show how your software aligns with these trends and can help banks stay ahead of the curve.
  • Position your software as an investment in the bank's future. Showcase how it can help them adapt to emerging technologies and regulatory changes.

2. Internal Research and Feasibility Studies

Once a bank identifies a need or an opportunity for new products, it will conduct internal research, including:

  • Analyzing existing systems
  • Assessing resource constraints
  • Understanding internal IT capabilities

System analysis: Banks meticulously examine their existing technology infrastructure. This involves understanding the capabilities and limitations of their current systems to determine how a new solution would integrate.

For instance, a bank looking for a new fraud detection system will assess its existing security software, data storage capacity, and network bandwidth to ensure compatibility with the new solution.

Resource constraints: Banks have budgets and manpower limitations. Internal research will evaluate the human resources required to implement and maintain the new technology.

So, if a bank identifies a need for access governance software, they'll assess two key things: 

  • The initial investment required for implementation, including integrating the software with existing systems and training staff. 
  • The ongoing manpower required to maintain the software, such as keeping access policies and user permissions up-to-date. 

IT capabilities: Banks will assess their IT department's expertise and capacity to handle the implementation and ongoing support of a new technology solution.

What can you do to align your pitch and stand out among competitors?

  • Research the bank's existing technology stack to tailor your presentations to address how your software integrates seamlessly with their current systems.
  • Be upfront about the resource requirements of your software and provide estimates for training time or additional personnel needed for implementation.
  • Emphasize the user-friendliness of your software and the level of support you offer. This can alleviate concerns about the IT department's workload.
  • Clearly communicate your software solution's unique value proposition. Highlight how it more effectively addresses the bank's specific needs than competitor offerings.
  • Showcase your expertise in the banking industry and your understanding of the specific challenges banks face. Position yourself as a trusted advisor and a partner, not just a software vendor.

3. RFP (Request for Proposal) Issuance

If the bank's internal research and feasibility studies point towards acquiring new technology, this is where the game truly begins. The formal bidding process starts with the issuance of an RFP (Request for Proposal) — a blueprint for the bank’s needs.

The RFP is required by both established vendors and new fintech startups, and it clearly outlines the specific problem or challenges the bank is trying to solve with the new technology.

For instance, an RFP for a new fraud detection system might state the bank's concern about rising online fraud attempts and its need for a solution that can analyze transactions in real time and identify suspicious activities.

The RFP also details the functionalities the bank needs in the new software solution. This is a kind of shopping list outlining the must-have features. Using the previous example, we can say the fraud detection RFP might specify requirements for integrating with the bank's existing transaction processing system, data analytics capabilities for identifying fraud patterns, and real-time alerts for suspicious activities.

Finally, the selection criteria. The RFP will disclose the criteria the bank will use to evaluate proposals from different vendors. This might include factors like technical capabilities, security features, vendor experience, and implementation costs.

Want to nail your proposal? Here’s what you can do:

  • Carefully analyze the RFP document, not just the stated requirements. Look for underlying challenges or preferences that might not be explicitly mentioned.
  • Tailor your proposal to directly address the specific requirements outlined in the RFP. Don't submit a generic sales pitch - show them you understand their unique needs.
  • Clearly showcase how your software solution fulfills each functional requirement listed in the RFP. Use specific examples and data to demonstrate its capabilities.
  • Use data or case studies to demonstrate how your product can improve efficiency, reduce costs, or mitigate risks, focusing on how it can also benefit your customer base.

4. Vendor Selection and Shortlisting

Submitted your proposal? Now, brace yourself for the provider selection process — a competitive match where your solution will be scrutinized by the bank's selection committee — from tech experts to department heads.

IT specialists will evaluate your software's technical architecture, ensuring it integrates seamlessly with their existing systems and meets their stringent performance criteria.

For example, the IT team might assess the scalability of your cloud-based solution to handle the bank's transaction volume or evaluate the security protocols in place to protect sensitive customer data.

Security teams will laser-focus on your software's security features. They'll ensure it complies with industry regulations and safeguards the bank's sensitive data from cyber threats. For instance, they may look at your encryption standards, access control mechanisms, and disaster recovery plan to assess your software's resilience against potential security breaches.

Finally, representatives from relevant departments, like fraud prevention or customer service, will evaluate how your software addresses their specific needs and workflows.

As an example, the fraud prevention team will assess your fraud detection system's ability to analyze transaction patterns, identify suspicious activities, and generate real-time alerts.

How can you make sure you make the shortlist?

  • For presentations to the selection committee, consider inviting technical specialists from your team as they can address IT concerns, and team members with banking industry expertise who can connect with departmental needs.
  • Anticipate technical questions and prepare in-depth demonstrations showcasing your software's functionalities.
  • Don't just talk about security features — quantify them. Explain your encryption strength, data access protocols, and how you handle security vulnerabilities.
  • Reiterate the value proposition of your software. Show the selection committee, with data or case studies, how your solution will translate into cost savings, increased efficiency, or improved customer satisfaction.

5. Proof of Concept (POC) and Demonstrations

Let’s say you’ve impressed the selection committee with your proposal — congratulations! Now, it's time to showcase your software's capabilities in action. This stage involves Proof of Concept (POC) testing and live demonstrations.

Banks might invite shortlisted vendors to participate in a POC. This involves deploying a scaled-down version of your software in a controlled environment within the bank's IT infrastructure.

Take a bank considering a new loan processing software. It might conduct a POC where the software is tested with a limited set of loan applications to assess its functionality, integration capabilities, and user interface.

The POC allows the bank to assess how your software performs in their specific environment. They can identify any integration challenges, evaluate user adoption by their employees, and ensure it meets their security standards.

A successful POC should be all “show, don’t tell”. Live demonstrations are your opportunity to showcase your software's functionalities in action. Allow the selection committee to interact with the software and ask questions.

For instance, during a fraud detection software demo, walk the committee through how the software analyzes transactions, identifies suspicious activities, and generates alerts.

How can you use this chance to get the necessary buy-in?

  • Address any lingering concerns raised by the selection committee during the RFP or POC stages. Use the demo to showcase how your software solves those specific issues.
  • Remember that any generic presentation won’t help you acquire the customer. You need to adapt it to address the bank's specific needs and challenges, highlighting features that directly benefit their departments.
  • Work closely with the bank's IT team during the POC setup. Address any integration issues promptly and ensure a smooth testing experience.
  • Don't wait for the POC to be over to collect feedback. Schedule regular meetings with the bank's team to address any concerns or questions that arise during testing.
  • Track key metrics during the POC, such as processing times, error rates, or user satisfaction. Present this data to the bank to showcase the software's positive impact.
  • Don't just focus on technical features. Demonstrate how your software is user-friendly and intuitive for the bank's employees.

6. Contract Negotiation and Due Diligence

You've battled through the RFP process and emerged as a frontrunner. But before you start celebrating, there's one final hurdle: contract negotiation and due diligence.

Banks will likely negotiate the pricing structure for your software solution. This might involve discussing licensing fees, subscription models, or pay-per-user options. For instance, you may negotiate a tiered pricing structure based on the number of users or transaction volume the bank anticipates.

Service Level Agreements (SLAs) define the expected level of service you'll provide, including uptime guarantees, response times for customer support, and disaster recovery protocols. An SLA might stipulate a 99.9% uptime for your software and a guaranteed response time within two hours for critical support issues.

Finally, both parties will review and negotiate other contractual terms, such as data ownership rights, intellectual property clauses, and termination clauses.

Don’t forget that the bank will also conduct thorough due diligence to assess your company's financial stability, security practices, and track record. It may request your financial statements, audit reports, and information about your past security breaches (if any) and how they were addressed.

Be prepared to provide the bank with all necessary information during due diligence. Transparency builds trust and facilitates a smooth process.

How do you make sure you close this deal?

  • Be confident in the value your software brings to the bank. This strengthens your position during price negotiations.
  • While adhering to core principles, be prepared to negotiate certain aspects of the contract to reach a mutually beneficial agreement.
  • Focus on long-term partnerships, not just short-term gains. Negotiate terms that foster a long-term, successful partnership with the bank.
  • Anticipate potential sticking points in the negotiation and have alternative solutions ready to address them.
  • To expedite the due diligence process, all relevant financial documents, security certifications, and customer references should be readily available.
  • If the bank has any questions or concerns arising from due diligence, address them promptly and transparently.
  • Showcase your company's strengths, such as industry certifications, a proven track record, or a strong financial position.

7. Implementation and Integration

So, you've signed the contract and are officially a partner with the bank. Now comes the exciting but crucial phase of implementation and integration, where you bring your software to life within the bank's environment.

Step 1: System configuration

Your team will work with the bank's IT department to configure your software to meet their specific needs and workflows. This could involve customizing user interfaces, integrating with existing data fields, or setting up specific rules and parameters.

Step 2: Data migration (if applicable)

If the new software requires historical data from the bank's existing systems, a secure and efficient data migration plan needs to be established.

Step 3: System interfaces

A crucial aspect of implementation is integrating your software with the bank's existing technology infrastructure. This ensures smooth data flow and eliminates the need for manual data entry.

Step 4: Data standardization

Data needs to be standardized across different systems to ensure accurate and efficient communication.

Step 5: User training

Even the most sophisticated software is worthless if users don't know how to use it effectively. Providing comprehensive user training is crucial for successful adoption.

Step 6: Ongoing support

Be prepared to offer ongoing support to the bank's users after the initial rollout. This might include providing technical assistance, answering questions, and addressing any issues that arise.

How can you set up your new customer for success from the very beginning?

  • Work closely with the bank's IT team throughout the configuration process. Address their concerns and involve them in decision-making to ensure the final configuration aligns with their needs.
  • Configure the software to be user-friendly and intuitive for the bank's employees. This will minimize resistance and encourage user adoption.
  • Conduct rigorous testing after configuration to ensure all functionalities work seamlessly and there are no compatibility issues with existing systems.
  • Many software solutions offer integration tools and APIs to facilitate seamless connection with other systems. Use these tools to simplify the integration process.
  • Develop training programs that cater to different user groups within the bank, addressing their specific needs and functionalities within the software.
  • Provide the bank with user manuals and a dedicated support channel for easy access to ongoing guidance and troubleshooting assistance.

8. Ongoing Support and Maintenance

The software is implemented, integrated, and your users are trained. But the finish line isn't quite in sight yet. An ongoing commitment to support and maintenance is essential to ensure the bank continues to reap the benefits of your technology.

  • Bug fixes and troubleshooting: Even the best software can encounter bugs or glitches. Your support team should be available to address any technical issues the bank encounters and provide timely bug fixes.
  • Performance monitoring: Proactive monitoring of the software's performance is essential. This allows you to identify and address any potential issues before they disrupt the bank's operations.
  • Regular security updates: The cybersecurity landscape constantly evolves, with new threats emerging constantly. Regular security updates are crucial to ensure the software remains protected from vulnerabilities.
  • Compliance requirements: Financial institutions are subject to strict data security regulations. Regular security updates help ensure your software remains compliant with these evolving regulations.
  • New business needs: The bank's business needs and priorities might evolve over time. Your ongoing support should include the flexibility to adapt your software to meet these changing requirements.
  • Technological advancements: Being a supportive partner also means staying updated on industry trends and offering solutions to integrate new technologies that complement your software. The bank may, for example, express interest in leveraging artificial intelligence (AI) for loan risk assessment, so you’d need to explore how your loan processing software can integrate with AI-powered tools to enhance its functionality.

What else can you do to provide the best customer experience and support to your bank customer?

  • Clearly define service level expectations in the initial contract. This sets benchmarks for response times, uptime guarantees, and resolution timeframes.
  • Conduct regular penetration testing to identify and address vulnerabilities in your software before they can be exploited by attackers.
  • Communicate regularly with the bank to understand its evolving needs and challenges. Be proactive in suggesting ways your software can adapt to address those changes.
  • Continuously invest in research and development to improve your software's features and functionalities. This ensures your solution remains relevant and valuable to the bank in the long run.

Selling Technology to Banks: 3 Best Practices for Landing New Customers

We’ve provided a lot of useful advice throughout this guide, so let’s conclude this comprehensive guide with a few final best-practice-style tips to make sure your sales efforts are successful.

Establish a Strong Business Reputation

Build a positive reputation within the fintech industry and the broader financial services landscape. Positive industry recognition and case studies showcasing successful implementations in similar banks can go a long way.

Build Connections to Get to the Right Decision-Maker(s)

Focus on building relationships with key players within banks and fintech companies. Foster strong relationships with three key stakeholders:

  • The Executive: The decision-maker who signs off on the final purchase.
  • The Product Owner: The person who champions the project internally and understands the specific business need your software addresses.
  • The Project Manager: The one responsible for overseeing the implementation and ensuring a smooth onboarding process.

Try to Land a Small Project and Expand From There

Large-scale projects may not be the initial entry point. Focus on landing a smaller, high-impact project that showcases the value of your solution and establishes a successful track record within the bank. This can pave the way for bigger opportunities in the future.

How AltiSales Can Transform Your Bank Software Sales Strategy

Selling software to banks successfully requires a deep understanding of the industry, strategic connections, and a robust approach to meet stringent requirements.

AltiSales specializes in guiding technology companies through this intricate process, ensuring your software stands out and meets the high standards of financial institutions.

With our expertise in tailored strategy consulting, proven sales methodologies, and comprehensive support, we empower you to build credibility and trust within the banking sector.

Ready to elevate your bank software sales strategy?

Contact AltiSales today to learn how we can help you navigate and conquer this challenging market.