Fintech’s Revolution AND Evolution: From competition to collaboration to referral partner programs

Tornadoes, whiteouts, hurricanes… we can usually see signs of their impending arrival, but even so, we are never quite prepared for the effects they bring. One day, we see a well-known and understood landscape, and next, everything has changed and we must learn how to navigate a new territory.

Thus was the fintech revolution.

But while this shift of the financial landscape may have seemed sudden, there were signs. Once the financial meltdown removed the guarantee of banks being a stable financial choice, the idea of alternatives to the traditional banking model suddenly became a viable option. And with the technological boom, digitalization of finance operations was a logical business innovation. Disruptive and transformative, a wave of financial technology (fintech) startups formed from these two coinciding developments.  While new B2B fintech business models targeted several different facets of the financial world, the majority have focused in on payment and lending. These startups brought the finance industry into an age of technological innovation by infusing automation, real-time payments, and better loan offerings through peer-to-peer lending platforms into the financial ecosystem.

From this, the finance world got much more snug. Suddenly, banks’ dominance of financial markets wasn’t a given, and the financial industry was overrun with competition. The status-quo was no more. But the fintech revolution didn’t stop there. This revolution has undergone an evolution. And competition was just the first step in an evolving chain of transformations that allows not only fintechs to benefit, but banks and clientele as well.

Competition: fintech vs. banks

The recent boom in the fintech industry reaches across the globe as people become more comfortable managing their money and business online. These B2B fintech startups are offering tech-enabled payments, currency exchange, crowdfunding, online lending, and wealth management services. These companies are competing and beating out traditional banks and financial services firms. Why?

The digitization of businesses has heightened B2B customers’ expectations of deliverables. Fintechs offer companies agility, speed, transparency, and integrations that banks have only ever offered businesses on a superficial level. According to Business Insider, 82% of customers said that a primary value proposition of these products is that they are easy to use, 81% said faster service, and 80% said good customer experiences.

There is a large frustration with big banks which allows fintech companies to fill the demand. Goldman Sachs estimates that fintech start-ups could steal up to $4.7 trillion in annual banking revenue, and $470 billion in profit, from established financial services companies.

But competition isn’t solely a worry for banks. Other fintechs also face their own competitors. Like any disruptive business innovation, disruption of industry standards only get you so far. Fintech startups are flooding the industry, and because of this banks won’t be the only ones who disappear in the coming years. And while these FinTech startups may have changed the financial structure for good, when the dust settles, and the new landscape is set, the financial world is going to get much more hostile for these pioneers. This is especially true for fintechs that only have a niche offering and lack the long-standing experience and insight many investors are looking for. But don’t get me wrong, the fintech industry is still growing. So what does this mean overall? While the fintech industry has amazing potential to overtake banks, it also has its own challenges from within. With fintech lacking the long-term success and wider offerings needed to dominate the financial market and banks lacking the agility to compete head-to-head against fintechs, the realization has occurred that continued survival does not lie in competition, but rather collaboration.

Collaboration: acceptance and integration of digitalization

As fintechs grew in abundance banks tried to compete, but their established internal structure lacked automation, was restricted by regulations, and couldn’t adopt anything that would come close to the agility of fintechs’ SaaS products. On the other side, fintechs found it extremely difficult to garner industry respect and trust without the historical experience that banks have. In this way, fintechs and banks have become two halves of a whole, and thus came about the inspired idea of collaboration.

So it’s settled, fintechs and banks collaborate to create disruptive new offers. Unfortunately, it isn’t as simple as that. How to go about designing a beneficial partnership requires more thought. This hang-up is felt throughout the industry. In fact, according to Business Insider, 46% of banks plan to collaborate with fintechs, but only 13% believe their core systems can handle the technical demands of partnerships. The financial industry believes partnering with these companies is the best way to stay afloat. This makes sense since banks are set up to maximize security and minimize their costs, not to innovate. Reliance on fintech companies for innovation will be critical. And for fintechs, to gain expertise in regulatory matters and create stronger offerings they need to be able to set up an equal partnership with banks. But in order to do this, it is crucial that fintechs and banks find a way to automate and scale this type collaboration. Thus enters automated referral partner programs.

Referral partner programs: Aligning banks and fintech companies

Fintechs and banks both have different strengths that allow them to accomplish a certain level of success, but they each also have challenges that hold them back from growing further. A partnership removes the need for either to have to overcome these challenges internally. But in order to create long-term sustainable partnerships, banks and fintechs need to be able to automate that relationship. Referral partner programs does this by facilitating a seamless referral partnership that is low friction. Referral partnerships are at the core of many fintechs’ success. OnDeck, Funding Circle, and Lending Club and TSYS are just a few that have developed referral partner programs in order to establish greater trust, provide a wider offering and reach new customers. This is because referral partner programs can create deep partnerships with banks and fintechs that fill offering gaps to increase the value they can provide customers. Referral partners understand the pains of target customer and can extend the trust they have previously developed to encompass the referred company.

Fintech and banks can go about referral partner programs in three different ways:

1. A company can build a referral partner program for their many different individual partners, small businesses and agencies. These will usually be for unmanaged partners.

2. A company has a major partner entity, for which they create a dedicated referral program. This type of referral partner program would be based off a deeply integrated offering on the technological side and the ideological side. One example of this type of referral partner program is Funding Circle and H&R Block. In this referral partnership, H&R Block made Funding Circle the preferred lender for all their small business customers.

3. A company builds a program for one or many major partner entities and their sales teams. This is a more advanced and requires the ability for partner entities to have the ability to keep track of, manage, and increase their advocate pool while having greater capabilities to incentivize and manage partner activity. OnDeck has found great success at using a more advanced referral partner program to increase customer acquisition.

As the financial landscape changes, think about how you can overcome your internal challenges and generate more high-quality leads, especially from your smaller partner. To discover what kind of benefits a referral partner programs and referral software could provide, download the benchmark study, The State of Business Partner Referral Programs – Annual report, to better understand referral partner activity, behavior, sales involvement, rewards and the relative conversion rates.

 

Originally published on Salesforce

Why offline referrals are still important to brands

These days, with the explosion of social media and email, it is important to remember that a lot of word-of-mouth referrals happen the old fashioned way—as words literally coming out of someone’s mouth. There are sometimes good reasons why… The following example is absolutely true. ..

A few years ago, I lived in Oklahoma, and I knew these two guys.  I’ll call them Mick and Jimmy.  Mick was young clean-cut dad who had played basketball in college. Jimmy was a good ‘ol boy from rural Kansas, an older, hardened fellow.  So, one time we’re on a road trip, driving through nowhere, across the plains on a highway, late at night, and I’m in the backseat.  Mick and Jimmy are in the front seat, and they think I’m asleep.

Mick starts telling Jimmy a story.  Mick’s house had just been robbed, and he knows who did it, a contractor who had just come through to do some work in his home. All of Mick’s wife’s jewelry is missing. Vanished. Police don’t care. No evidence.  Mick went to the contractor’s shop. Confronted him.  The contractor had just laughed.

Jimmy listens to this story, and the car is quiet for a few minutes.  Then, Jimmy swivels the toothpick in his mouth and says, “You need… a referral… I know a guy.”

“A guy?” asks Mike.

“Big son-a-gun.”

“Yeah?”

“A thousand dollars, he’ll throw anyone in a van, drive ‘em down to Florida, and throw ‘em in a ditch.”

“What… whoa… Does he kill them?” asks Mick.

“No. Just the van and ditch. He ties ‘em up. They don’t know they’re in Florida when their tossed out of van, you understand. Runnin’ cross a swamp with your hands tied behind your back? That’s scary. And that’s his deal.” Jimmy nods his head in the darkness as he says these words… “It sets ‘em straight.”

Mike was quiet.

“I’ll… get you in touch with him,” says Jimmy.

“I don’t know, Jimmy… Email me his number and maybe…” says Mick.

“Email? Hell no. But I’ll tell you a number if you want to write it down.”

 

Why Offline Referrals Are So Important

At Amplifinity, some of our most successful clients, giant household name brands, have built powerful referral programs around our platform’s remarkable capability to handle and reward offline referrals. Amplifinity’s platform gives advocates a referral code that they can pass on to prospects. Advocates can give these codes out verbally or they can print them out on referral cards on their computer. Marketers can even mass-laser print referral code cards in advance to give to their advocates to hand out to their friends. The prospect can use the referral code wherever they buy the goods in question—whether it is calling into a call center or walking the code into a retail store.

 

  • Leave no trace, but still earn a reward: In our story above, Jimmy is going to recommend a hitman to Mick. Jimmy is not going to put the hitman’s number in an email or post it on Facebook because he doesn’t want it public. This example is extreme, but it proves a point. The truth is that many successful referrals are made to friends and colleagues that are best unknown to employers, spouses, etc. (Don’t tell my old boss, but at my previous job, I once referred a good vendor to a competitor, just because the vendor was so awesome.) And yet, even if a company or personal email account is not used to transmit the referral from the advocate to the prospect, a referral automation solution is still needed, behind the scenes, to listen for these referrals, to close the loop on successful referrals, and to reward advocates for making them.

 

  • Believe it or not, not everyone is digital: Jimmy is not going to put the hitman’s number in an email or post it on Facebook or text it because Jimmy doesn’t use email or Facebook, and he owns a flip phone. It’s hard to believe, but many people, even if they are on the net or own cell phones, don’t rely on these things for digitally communicating with the people they care about. Marketers must make referrals easy to share.

 

  • Printed referral codes may actually have higher response rates: At Amplifinity, one of our most successful client referral programs ever, winner of a WOMMY award, ran primarily on pre-printed referral cards. Their referrals made offline eclipsed the performance of modern digital methods. The client was a chain of laser beauty clinics, the type of sale that requires a high level of emotional trust and discussion between advocate and prospect. Much like referring the hitman in our story, it’s the kind of referral that requires a conversation. Accordingly, a printed card physically handed between friends goes well with a face-to-face conversation.

 

I don’t know if Mick ever got his wife’s jewelry back, but digital marketers can still learn a few old tricks from Jimmy.

 

Want to further the discussion? Tweet me @EJJake.

What is brand advocacy?

Referral tracking software and untapped lead generation

So we have this client here at Amplifinity, a big business-to-business services company, that until a few years ago, used no referral tracking software and thus had no means to efficiently and automatically reward customers, employees and partners who referred new customers. Without tracking and rewards, management didn’t care, customers didn’t care, and referrals made up only a small fraction of their total leads.

What a difference a few years can make. Today, as shown in the graph below, powered by Amplifinity’s software, referrals now comprise over half of all of the leads flowing into our client’s sales organization.

Referrals generate highest revenue by lead source

The evolution we saw in our example client shows the untapped potential that referrals have for lead generation. Let us break it down…

 

  • Rewards generate leads. We’ve seen this again and again. No matter how much customers love brands, they will refer a lot more once you give them an incentive. It works. It catches fire. Earning rewards for making referrals makes them love the brand even more. Amplifinity’s referral tracking software has the capability to automatically nurture advocate to refer again and again with escalating rewards.

 

  • Leads generate happy sales reps, who’ll hunt for more referrals. Our client experienced such rapid evolution in the sourcing of its revenue because referral marketing snowballs. Once your sales reps see leads coming to them from your referral automation solution, they will find faith in your referral program— they will see how easy it is to get leads from referrals instead of cold calling. Accordingly, they will turn their attention to working their existing book of business to give them more referrals. The assurance of rewards for existing customers gives them a reason to do this with friendly confidence.

 

  • Successful referral programs breed additional successful referral programs. Automated referral programs are contagious. As soon as you get a referral program cooking for one of your brands, its performance will build a fully-quantified business case for referral programs for your other brands. As soon as you have referral programs to reward your customers, you will see a business case for employee referral programs and affiliate referral programs. (Amplifinity’s platform can handle programs for as many brands and advocate types as is optimal for your organization.)

 

With fully-automated customer, employee and affiliate programs deployed you will soon realize the full lead generation potential for referrals. In all of our clients, we have seen it transform the way they market, the way they sell. Referral marketing is the future of B2B lead generation, and referral automation makes the world your sales team.

Interested in continuing the conversation? Tweet me @EJJake.

 

What is brand advocacy?

 

How referrals saved the B2B buying process

Rewind 20 years. Fresh out of business school, I was managing procurement for a small business unit of a big company. To understand this story, you have to understand the two senior executives I worked with in my buying process. They were both named Dave.

Dave #1 ran the business unit and was a rockstar in our industry, smart and polished. You could slice cake with the crease in his slacks. Every morning, he arrived at the office with five ideas about how to make the business bigger and better. His vision of where our revenue numbers could go made my head spin. I worshipped the guy. I was in awe of him.

Dave #2 ran purchasing for the parent corporation and he was old school. He wore perfectly starched white shirts. He tied his tie so tight around his neck it made his head a sort of reddish-purple color. This came in handy every time someone walked in his office for a purchase order to spend our money on something the company didn’t need. He could shoot your ideas dead before you even thought of them. Our cash flow and capital expenditures were the envy of the industry. I worshipped the guy. I was in awe of him.

Both Daves were great mentors. My only problem was… I was always buying the wrong thing.

Twenty years ago B2B referral software did not exist. You see, every time I tried to save money, it seemed the businessman working in the officestuff I procured would turn out to be crap, whether it was parts for our product or even just office supplies. When this happened, Dave #1 would give me a look like I just threw his brand out the window. Every time I bought the fancy alternative, Dave #2 would give me a look like I just flushed his money down the toilet. The internal conflict was killing me. I remember wanting to throw up in the men’s room of the skyscraper where we worked.

As time went by, I resorted to a couple classic hacks to improve our purchasing decisions…

First, I simply tried buying stuff priced in the middle – seemed pretty safe. But… I quickly learned that price and quality are loosely correlated at best.

Next, I tried the good ‘ol classic RFP buying process – writing up requests for quotes that included all kinds of specs and industry standards. This helped a little, but I still ended up with a lot of crap. Vendors don’t always deliver exactly what they quote. Even checking with references supplied by the vendors didn’t help. Sure, I could have returned the crappy stuff, but that doesn’t save you when you have a rapidly growing business unit and a six-month lead time for scoring a replacement from another vendor.

So after all this experimenting, I was still buying the wrong stuff. I’ve read that a lot of people have recurring dreams about forgetting to study for tests or falling off cliffs or being naked. Not me. Even today I dream about the two Daves signing my purchase orders, the flickering fax machine like a roulette wheel at the end of my dysfunctional buying process, and the horror of what I’d find when the pallets arrived on the trucks.

Fast-forward twenty years. Everything has changed. My buying process is totally different thanks to B2B referral software. Now, I rarely buy anything without advice from my friends at other companies. In the past, getting some quick advice wasn’t as easy as it is today. I couldn’t go on LinkedIn to see who was working where and who was the best source of relevant advice. I couldn’t just ask for a great vendor referral and get an answer in a matter of minutes.

Marketers selling to businesses must understand the gravity of this change. Purchasing decisions are totally social now. But, participating in social conversations where procurers are seeking advice is difficult. Merely posting content on social networks won’t interrupt the conversations I have with my friends about what to buy. To participate in such conversations, brands must engage and provide incentives to participants. Incentivized brand advocacy in the B2B purchasing process allows this to happen.

The most powerful tool any B2B marketer has is a referral program where customers are compensated to advocate on behalf of their brand. I don’t have a problem if my friend is getting a kickback when they recommend a product to me. I trust their recommendations just because I trust my friend. In fact, if the incentives have helped them to be better informed about what they are recommending, and it saves me time with my research, I am grateful for it. Incentivized referral programs are going to change the way we do business. And the best products and services will still win. We’ll just know where to find them more quickly and we’ll buy them faster because we trust the recommendations we get from people we trust.

Today I have more nightmares about showing up naked, and fewer about opening pallets of junk.

The orange cat: A brand advocacy fable

My family has two cats. One is an orange cat. One is a black cat. And we have this weird thing that happens in our house– my nine year-old son and his buddies like to have Nerf Gun battles, and they shoot these fluorescent orange foam bullets at each other.

Nerf bullets for brand advocacy The bullets end up behind curtains, under sofas – everywhere. The weird thing I mentioned, is that a couple hours after they finish a fight, our orange cat walks mechanically around the house, collects the orange bullets, and deposits them in a specific location – just outside our kitchen. Then he meows repeatedly, at a very specific pitch, sort of like a submarine sonar. My daughter pets the orange cat and tells him he is a good kitty while he picks up the bullets. The black cat watches all of this without helping in any way. The black cat has never retrieved even a single foam bullet.

Having looked at data across many of our clients here at Amplifinity, I can tell you that these cats are a lot like your customers, and my daughter has the right idea. Be good to the black cat, but don’t spend too much time trying to get him to do stuff he isn’t going to do. Likewise, don’t waste too much money chasing customers who will never advocate for you.

We consistently observe that there will always be a segment of your customers who take on the role of serial brand advocate. These customers will dutifully and tirelessly serve your brand whenever you ask. And like my daughter rewards the orange cat for gathering up the bullets, you need to reward these customers every time they refer a new prospect or advocate for your brand. In fact, once this group gets going, they will become upset if you don’t give them an extra pat on the back. Our orange cat now meows loudly until someone tbrand advocate cathanks him for retrieving each individual Nerf bullet. Trust me, you don’t want to get a call from an angry customer like him! He might sharpen his claws on your sofa if you forget to show him your appreciation.

At Amplifinity, our data shows that escalating rewards is an excellent means by which to nurture serial brand advocacy. Our software platform makes these types of programs possible, even if it is across thousands or even millions of customers. And, our detailed process flows and integrations make sure that the orange cats get rewarded every time.

Sun Tzu’s ‘The Art of War’ and employee referral programs

Sun Tzu was a pretty ferocious character. For over 2,500 years, the ancient Chinese general’s Art of War has been studied by military scholars around the world. Many regard it as the greatest treatise on war strategy ever. In recent decades, business scholars have mined it for business advice, pretending that Sun Tzu was really talking about corporate strategy when he wrote it. Indeed, nearly all of his verses apply to the business world. Except for maybe the ones about dropping fire out of the sky on people. But we’ll skip talking about those.

Today, let’s focus on Chapter II, Verses 16 – 18. As you read the following, do so in a slow loud, growling voice. It helps to understand where Sun Tzu was coming from…

“Now in order to kill the enemy, our men must be roused to anger; that there may be advantage from defeating the enemy, they must have their rewards. Therefore in chariot fighting, when ten or more chariots have been taken, those should be rewarded who took the first. Our own flags should be substituted for those of the enemy, and the chariots mingled and used in conjunction with ours. The captured soldiers should be kindly treated and kept. This is called using the conquered foe to augment one’s own strength.” — Sun Tzu, 500BC

That was really awesome. Clearly, Sun Tzu is talking about the importance of incentivizing employee referral programs. Let’s break it down together:

1. Reward your employees when they steal customers from your competitors.
2. Reward your employees when they recruit employees from your competitors.
3. Stealing customers and employees from your competitors will make you even stronger.

That sounds really cool and scary, doesn’t it? The only problem is that when Sun Tzu was around, even a gang of a hundred guys was considered an army. How do you keep track of things when you have thousands of employees and millions of customers to steal? The best solution is to have a software platform like Amplifinity integrated with your CRM system or billing system that keeps track of who is stealing whom. This ensures that customers don’t get lost and that employees always get rewarded when they earn it. Our platform works well for employee recruiting on behalf of human resources too.

So, if you need a software platform for your own competitive Art of War marketing warfare, Amplifinity is the strategy for you. Our software is Sun Tzu on an enterprise scale. We allow employees to reach out across their social networks (online and offline) to nab friends, family members and colleagues from competitors.