We asked Sharif Mohamed, Head of Affiliate Partnerships at iwoca, why partnerships are crucial, and how to build successful FinTech partnerships.
Sharif, thank you for being with us. You have tremendous experience in partnerships, and before that you used to work in B2B sales and then commercial partnerships, and now affiliate partnerships as well. How do you understand partnerships? How do you define it?
For me the overall view of partnerships is essentially anything where a customer base is going to get a better experience or a better service, and ultimately two or more companies are going to benefit from using each other services or each other's facilities or products or whatever it may be. So to look at it more intrinsically, for me strategic partnerships are one area and that's very much where, to put it into a simple context, two companies are going to benefit from using each other. That may be, to put it into a fintech perspective, someone like us - a lender - partnering with a digital bank, where the digital bank is going to be able to offer their customers a new service that's gonna help with customer retention the customers are going to enjoy it. At the same time we're building our own customer base by acquiring essentially users from their own customer base. Both partners are benefiting and also the customers are getting a better service overall. If you look at the other side of things would be, for example, affiliate partnerships are less a strategic partnership because actually one partner is essentially a customer acquirer and we're just taking that customer flow from them. So, for example, a financial comparison site, an aggregator, their sole purpose is for people to go to them, find the right financial solution for them and ask to be on that panel of solutions. If we're the right lender for that person, for that person's needs, we will have that customer come through to us and we'll serve that customer. So, at the same time, both businesses are benefiting, but it's much less - they're not trying to build up customer retention, or use us a tool to give a better customer experience. It's much more their sole purpose is to find a solution and then just pass the customer on.
From what I understand, partnership isn't finished at the stage when you're signing an agreement or you integrating products, engagement is a really an important part, and maybe something else. How do you engage in partnerships?
A very big part of partnerships is the relationship. You can have fantastic commercial partnerships that in theory should work very well. But if both partners aren't fully engaged, if there's no real trust built up between them, if there's not good communication between them constantly, you'll generally find those partnerships either won't work at all, or they will never really be as successful as they could be. The relationship is probably one of the most important parts moving forward. It's generally a very long cycle to get a partnership set up in the first place; whether that be through technical integrations, commercial contracts, agreements, the legal side of things as well, it's a very long process. So realistically, if you're not managing that relationship from that point onwards, you've wasted a very long period of time.
Again for us, for example, if we're not keeping an eye on how happy the partner's customers are, and we're giving them a bad experience or something is wrong in the process and we're not picking out quickly relaying that to partners, so they can either make a fix on their end or we need to make a fix on our end; Those sort of things aren't picked up unless you have a good relationship and you're really both being very proactive with the relationship as well. So for me, putting all the commercial stuff aside, a lot of things make sense on paper, but they don't work if the relationship doesn't work it isn't built over time and that trust isn't there.
What is your practical go-to advice that you would use for engaging partnerships?
So I generally look at it in very separate ways. You need to build a relationship and build trust with, for example, senior management teams and key stakeholders to initiate the partnership. Have those talks about "Hey, you know, where we are going to benefit you, where you going to benefit from us, and how you going to benefit us as well. So having those discussions and then furthering them into commercial talks about how this works in a commercial sense, how we keep this efficient, do you need to more tech resource of do we need more tech resource.” That's one side of conversations for me.
The relationship is a completely different side of conversation. So it's not an individual it's not worth looking at it as an individual relationship, because that's where a lot of people get caught out. If I am talking to a senior management team about commercials, they're not going to have, for example, the same insights as maybe a product team or a customer facing team, so for me it's very important I have a team that also looks after that side of the relationship. We will be talking to, in-house sales teams and going back and forth with them talking about how this customer got on, and so on and so on. And actually that's where we'll pick up the majority of small problems that don't need big tech fixes but there might be, for example, a data point is coming through slightly wrong. We don't really pick that up, unless we're having those day-to-day talks - "hey how this customer get on,” “hey that customer get on?" That's where we pick up actually, quite a lot we're seeing this common problem, and it's a very small problem you wouldn't realise if you just looked at numbers. So for me that side of relationship is just as important, just as important as having these relationship with key stakeholders, CEOs, the commercial side of things.
So I look at it, as I said, a very split view. There's two relationships - there's a commercial side of things and then there is, really what I would call the relationship side, which is not actually high up, it's low down, or customer-facing teams, or the people who are actually dealing with it on a day to day basis.
Your company now is more or less mature FinTech, which is quite exciting. How do you see partnerships, as a role, as a function, evolving over time?
Partnerships, especially within FinTech, is always a key feature. Most revenue growth of FinTechs, my customer base growth is done through partnerships. If you take, for example, any digital lender, we wouldn't survive if we didn't have partnerships with banks, with service providers who can also offer credit to their SMEs.
Lending is, if you approach, for example, just lending as one thing, that's fantastic. Most companies need finance at some point, so lending will always be something on their mind. But if you could tie that in with services they're using on a day to day basis, that's where you then become not just a lender, but you become a key lender, and a very visible lender in that space. We wouldn't have that visibility without my partnerships. People can hear about, for example, iwoca through bus advertising or through regular advertising, email shots, mail shots - whatever you want. But where they really gonna remember us is when they're using for example their digital banking app and see "we can get a credit line, it's provided by iwoca". You remember the name iwoca because it's the lender that you are getting a credit from through your bank. So partnership is a very very key feature to any FinTech, and the same with banks.
If a digital bank, for example, is giving a new feature a cash flow feature, for example, and it's becoming very very popular. People are going to remember that bank because of that cash flow future, and that feature may be an outsourced feature. It may be provided by, I wouln’t say Xero, but may be provided by any cash flow FinTech in the industry. So really that bank needs that partnership as well, because they're being remembered for that key feature or that key partnership. So it's very important for customer retention, it's very important for brand visibility, and it's a very very important for growth as well. Moving forwards that's only ever going to expand.
You’re seeing more and more FinTechs moving to more marketplace style operation. So, for example, if you look at digital banks a few years ago compared to now, you'll have a digital bank is just a digital bank; It has its own few features as of now, maybe some sort of spending management features or expense management features. Now, if you look at for example someone like Starling. You go on there, and then they have their own marketplace you can plug and play with different accounting providers, with different lending providers, different insurance providers. It's much more a marketplace option and that's because customers are evolving. If you look at the typical customer now, that's using digital banking, it's more likely than not going to be a millennial. And everything can this age become very digital, everything people expect to be able to do things on their phone, on their laptop in their own time very very quickly. So having a marketplace is an obvious route to growth. You've got this product. rather than go to someone else separately let's just give them all of these options and they can just bolt onto this existing product. It improves customer retention, it improves growth across the marketplace. So partnerships is really going to expand and expand.
It improves customer retention, it improves growth across the marketplace. So partnerships is really going to expand and expand. And you're even starting to see now some of the main banks take on this marketplace option, where you've got banks tying in with companies like Bud, for example, where someone can use their normal bank account, but by using Bud's tying in their accounting platform, tying in expense management platform, tying different lenders to it, which can feed in and out of their bank. So really partnerships in the growth perspective is probably one of the most important sectors moving forward in FinTech.
Do you think it is possible to engage in partnership for almost any tech-enabled company, and what would be your advice for other tech companies, who're thinking about partnerships?
I think, realistically there's no limit to partnerships. There's no one who should sort of have an idea, believe in their idea and think "Maybe we can't pull off these big partnerships". I think realistically the way to think about it is "what is your value add, where are you really adding value?"
Realistically, that's probably why you started the company. We found something that is under-served or it's not being done properly, or we've made more efficient - great let's build a company around it. So you have to take it back to not just "hey what we've done as a company and how big we are or how old we, how long we've been going" to "what are we solving, who else is going to benefit from our solving that problem and how we're going to approach that and make sure that value-add is very very clear to them". I think a lot of people get caught down in partnerships, because they forget that point. They look at "hey, we need to partner with someone for customer growth, we need to be able to access bigger customer bases, we need to partner with a big name, because it's going to be great for brand awareness". And those points start overtaking actual the key point which is "what is the value-add?"
When you're having that partnership talk, you can't, especially if you're small, you can't add masses to their customer base. If you're, for example iwoca a few years ago, trying to partner with a bank. We didn't have tens and tens of thousands of businesses that they might be able to access to. So we can't use that point. Essentially it becomes a one-sided partnership, but where it becomes two-sided by saying "look we do want to access your customer base, but 80% of your customer base are all facing this one singular problem, which we solve.” So yes, we're accessing your customer base, but in return you're giving your customers something then can't get anywhere else and that's aiding a customer retention, that's also aiding more customers coming to you, because they know you're fixing that problem. So you really had to look at "what is the value -add".
So if you put it into iwoca context, we were doing unsecured business lending to a very underserved part of the market. People were struggling to get business overdrafts, struggling to get any sort of business credit if they were under three years old, for example. If they were able to get it, generally it was unsecured for any reasonable amount, and it was taking weeks if not months to actually secure. So we were lending to those people, that others were saying, "they're too risky for us"; we were doing it unsecured, so we weren't cutting out people -
I mean realistically if you think of living in London, the majority of people rent to quite late in their life. And at the same time, we were doing it within days, if not hours and now minutes. So our value add was very very strong. If you're a digital bank and you want to partner with someone for lending you don't want to lend your own. And obviously being able to lend then takes a long time to do - you have to build up risk brackets and say what's a risky customer what's not, you need a lot of data to do that. And you need a lot of capital, especially if you have another core business that is taking most of your capital, it's not really viable. So we were saying to them 'hey, we can be the lender we can give you that lending capability, we can do it 10 times the speed of a bank and we can lend to the majority of your customers, where the bank is actually turning them down.
And over time that's where we then focus on the other things, "hey we've now grown customer base, we've got new products that we can add on, we've proven our risk model is working with very very low lost rates, for example. So it's not something that is just a year long thing, it doesn't break down. That's when you can start focusing on other points to really build that relationship and try get more of commercial value. But our key proposition was "we're offering you something that you can't get anywhere else and your customers really want". That's should always be the key focus "what is the value-add". That's the best advice I probably give for anyone looking at partnerships.
Two-sided relationships, clear value proposition and constant engagement. Congratulations on recent news of winning a grant. It is somewhat based on partnerships, tell us more about it.
What the winning the BCR (Banking Competition Remedies) allows us to do is really a big part of that is focus on an open lending platform. [...] So that's RBS gave away just over, I think just over £40 million, to pools of FinTechs from digital banks to service providers, accountancy providers to lenders. Anyone in FinTech that was really pushing boundaries and going to allow the industry to grow as a whole, and at the same time give customers a much better experience as a whole over the next five years. So we fit into the lending side of that, and a big part of our bid for the BCR was an open lending facility. And what that really does is that's the next phase of partnerships for us. That's by saying we have probably one of the most extensive APIs already in Europe for any lender that allows us to do it capabilities-wise, and we're also still one of the fastest lenders in Europe. So really what that is how do we take that value proposition that we've now proved is added value and works very very well for different partners, how do we expand that, and how do we give other people ability to use that very very quickly. So the open lending platform essentially allows them to go and test with our API, use sandbox features rather than having to go through big commercial discussions and then go through tech and product discussions. It shortens that cycle a lot and it says, "look, you can come on and you can access the API, you can test with it, you can also do things like create maybe your niche products with it, you know, you want to offer a specific term and specific rates to your customers.” You can create all of that yourself with iwoca behind it as the tech and the lender, build that into your platform and then you could really take our value add, make it a little bit more niche so it's something that you see your customers really want. For example, if we we're offering a 12-month facility, you know from your specific expense management system typically of your customers are getting cash flow gaps of no more than three months, all the time. So you want to create a specific products that's just three months long, has set rates and offer at your customers. You're using our value add of the speed and the API and so on, tailoring it into your own value-add for your customers and really making the most of that partnership possibly. So for us that's really enabling us to build a partnership base much much faster, but on the basis that we're building that partnership based on that value-add. We're not just trying to grow a partnership base. We're saying "look, we know people value this, we know people need this, it's clearly still an under-served part of the market and your customers are probably saying they need this too or you can see through their operations they need it too. Let's reach those customers together,” and that's really what the BCR is allowing us to do that a much quicker pace. We would always do it anyway, but again, cash injection like that is fantastic help.
We'll do things much much faster, putting the resource you need, and so on. That's probably our next big step in pushing the boundaries of FinTech. There hasn't been and still there isn't a system like that currently available where someone can just plug and play for niche product for business lending. There's a little bit for a personal lending, but you'll generally find business lending follows personal lending.
We know how busy you are, so thank you very much for being with us and sharing with our viewers your insight.