How to build a fintech: Why BM Technologies’ Luvleen Sidhu pivoted to B2B2C and notes on partnerships and female leadership

Conversations with entrepreneurs often leave me with a lingering admiration. Where I store fear and doubt, entrepreneurs hold courage, they just order the world differently.

It’s a learned skill but one that takes much grit. It’s the willingness to get back on your feet and try again that makes all the difference. One good example of entrepreneurial leadership is BM Technologies’ CEO and founder, Luvleen Sidhu.

The industry’s acceptance of female leadership and even more so that of non-white female leadership is expanding every year. But Sidhu built her company in 2015 and at that time, BM Technologies was proposing to do something that was novel: offer digital-first banking products outside of the traditional banking environment.

Her story offers insight into how to build a fintech, how to manage partnerships and, all these years later now that BM Technologies is a public company, how to run a fintech.

There is always a problem

Sidhu’s objective for BM Technologies was clear from the outset, and it was this clarity that helped her solve issues and build partnerships that were mutually beneficial. “We wanted to be able to create a more affordable, transparent banking experience, and we wanted to respond to consumers’ needs,” she said. 

But the real task was translating this mission statement into a good looking bottom line. This was Sidhu’s first challenge and one that took some time to solve.

“In our first year, we opened maybe 100,000 accounts. But they were not profitable. Half of them were empty, there was fraud in them, and there were experimenter accounts – nothing that was going to lead to anything substantial,” Sidhu says.

A growth in the number of accounts doesn’t necessarily mean a growth in profits, and Sidhu and her team were learning this the hard way. “You can’t just have a good mission and a good product. You need a customer acquisition strategy,” she said.

Sidhu had to figure out a way to acquire customers at a cost low enough that her firm could realize some profits. To do this, they moved away from a pure B2C strategy to a B2B2C one in 2016.

Sidhu’s B2B2C pivot was the answer for BM Technologies customer acquisition troubles. Currently, the company partners with universities across the country to provide disbursement services and also has a long-running partnership with T-Mobile serving as the technological backbone of the wireless carrier’s embedded finance ambitions like its banking app.

Moving away from B2C helped the firm lower its customer acquisition cost to under $10 and reach a wider network of prospective customers by tapping into the ecosystems already built by its partners. 

Although the challenge of having a good customer acquisition strategy was significant, the macroeconomic environment in 2015 proved to be an enabler.

“The macro environment was very ripe for this disruption. So it wasn’t a challenge at the time. It was a very easy story to tell. Consumers are not happy and that banks have a very inefficient model. The neobank term was just beginning. So there was an excitement around technology, and what technology could do to evolve this space in new ways,” Sidhu says. 

How to run a company

Having overcome the growing pains, it was time that Sidhu built a structure around how her company would be run – including the partnerships that proved so critical to the firm’s growth. 

Partnerships: The key to a successful partnership is in remembering why you’re partnering in the first place, according to Sidhu. 

“We lose sight of the most important question sometimes. So we have to be very clear of what the value is that we’re providing to the stakeholder. For the universities, it is a very compliance-heavy process of dispersing financial aid refunds and it’s costly to them. It was very clear that the value we’re providing is the cost reduction, the efficiency, and eliminating or mitigating the compliance risk,” she said.

But as Sidhu said, having a mission alone isn’t enough. So to ensure that the scope and communication with the company’s partners is managed well, check-ins are mandatory. 

“Quarterly executive sessions where you’re aligned on what the strategic objective is, and then an agreed upon roadmap, for the next 6 to 12 months. Then we also factor in a 15% to 20% capacity for the unknowns and opportunities that we just don’t know on the date of that meeting — we want to be able to be innovative and flexible,” said Sidhu. 

Structuring the workforce: Looking back, Sidhu wishes there was one thing she had known when she was starting out with the company: how important it can be to have a home base for your firm. “I’ve always been envious of companies that have that,” she said. Currently, the firm is completely hybrid except for the leadership that meets quarterly to discuss strategy.

On the upside, her firm is able to recruit more widely but having a spread out employee network has some negative effects in the long term. “It’s so important to engage with your employees, and to have that face-to-face connection – to be able to motivate and inspire as well as build relationships. Rather than being so technological that we can figure out how to do this, no matter how dispersed our employee base is. Now, I’ve become more middle ground where you really have a strong physical presence. There’s a lot of benefits to that,” she said. 

Leading by example: Sidhu grew up in a family where she was told she could achieve anything. It’s an important affirmation for a young brown girl in America. It’s this belief that made her unafraid of challenges. 

But as her experience has grown, her bubble has burst. “As you grow up you become a little bit more cognizant of this. This is not some fictitious idea, microaggressions, and then more macro ones like the pay gap — these things exist,”.  

She believes her position in the world comes with responsibility to change the conversation around these topics. “I have a lot more pay-related conversations with men, who actively bring it up. In contrast, I can count on one hand how many women have ever brought it up to me. I want to change that narrative: you should be bringing it up. Are you afraid to bring it up? Because the men are definitely bringing it up,” she said. 

Sidebar: The difficulties of B2C

Sidebar is a member-exclusive section where we dive into stories that are tangential to the main story above. In this sidebar, I discuss how other companies have navigated the difficulty of the B2C space, if you want to keep reading please consider upgrading your subscription by clicking the link below.