Shrinking Dimensions: Sales and Distribution in a Fintech Startup

March 13, 2016

There is an exaggerated hyperactivity in fintech space these days. Couple of years back fintech was anybody’s guess, not so anymore, today every person worth his salt (me included) has heard, read, wrote or spoke on fintech.

What took precedence? Finance, technology or potential need of the customer, I think it is a cumulative idea whose time has finally come, a great idea, an even greater delivery platform which satiates a specific need of a customer hitherto un-catered using tech as a tool. However, the challenge still remains in having a sales and distribution structure which is cost effective, gives accelerated customer on-boarding and scalable in nature.Which aspect took precedence? Was it finance, technology, or the potential needs of the customer? I believe it's a combination of all three, an idea whose time has come. It's a brilliant concept, supported by an even more impressive delivery platform that meets a specific customer need that was previously unaddressed, using technology as a tool. Nevertheless, the challenge of establishing a cost-effective, efficient, and scalable sales and distribution structure remains.

As fintech continues to develop, so must the sales and distribution (S&D) structure. The key factors that determine the effectiveness of such a structure include:

Push or Pull Strategy – Superior products and technology platforms don't guarantee customer acceptance. When designing the S&D structure, it's crucial to decide whether the product needs to be pushed into the market or if creating awareness is necessary to generate a pull effect. Fintechs should ideally adopt a push strategy initially due to likely low brand awareness. However, exceptions exist, particularly when the product connects buyers and sellers on a common platform, like a mobile wallet – in such cases, a simultaneous push and pull strategy is essential.

Sales force driven by geography or technology – One of the core aims of a Fintech is market share domination at a lower cost per customer & leveraging  technology as a tool for customer acquisition however, the product by design may need on ground sales force moreover geographic diversity also may necessitate a brick and mortar model over a technology driven customer acquisition model.

Customer profile -   In Fintech platforms which target B2B customers, especially in developing economies are still not very tech savvy and therefore in spite of being a fintech personal touch points play a pivotal role necessitating for a re look on the delivery model. A web based tool or an app may not work if the target customer does not relate to it. Sometimes, a straight forward product has to endorsed likewise with simple sales processes.

Agent sales or outbound sales – This is another dilemma faced by organisations today – should we deploy outbound sales force or should we engage agents?  From an aggregator and scalability point of view the agent sales approach may be an enticing proposition however, customer acquisition through financial intermediaries/agents  has become a very expensive customer sourcing model and also don’t offer exclusivity or data security. Outbound sales team is good alterntive however, it can never be a plug and play model for new to market, innovative products. A productive outbound sales team needs certain aging in the organisation along with constant training and development initiatives to reach optimal performance level. The downside is the sales force hitting a performance plateau after reaching optimum productivity, this is when a linear expansion of outbound sales becomes an expensive affair.

Non-traditional distribution –

Content marketing is non-traditional distribution model using blogs, social media, infographics, articles, white papers however, the content should have utility, educational and prompt the reader to action on the content – This model for a fintech can be a complimentary sales acquisition channel but not necessarily can be a mainstay business generator.

Alliances, events, referrals – This is another sales distribution model which harnesses the distribution structure of existing an organisation by striking an alliance with them in a cohesive way, or by organising events & conferences and also by running referral program through such alliances.   

Paid online advertising/traditional media - People still read newspaper, listen to radio and watch cable therefore these can become potent sales distribution agents similarly paid online advertising has already caught up to reach out larger customer base however, all these are less of sales and distribution and more to do with marketing campaign of the company & may not result in instant customer acquisition.

Telesales v/s Field sales - The proponents of telesales shall swear by the model, telesales environment is controlled, captive data base, captive tele sales person & better quality management systems ensure better customer conversions however, fulfilment in few situations calls for a customer visitation leading to duplication of efforts. In diverse economies like India where each region speaks a different language it becomes challenging to set up a tele sales facility with advanced linguistic ability driven sales force. The other compounding factor is in house tele sales or out sourced tele sales model. Continuous evolution in sales & distribution strategy of any fintech entity is an ongoing process presently, my guess is this process will lead to a situation where a self-sustaining S&D eco-system is finally established - a lot like other matured financial systems the key is to test the infinite distribution models that are existing and optimise.

One distribution channel shall most likely outweigh other, it is imperative to have a check on customer acquisition cost and the number of the customers coming on board over a period of time because a distribution channel growing at a fast pace but with exploding costs can be quite fatal for a fintech start up.