Banks and credit unions have invested heavily in efforts to improve the customer experience, but most have done little to innovate their pricing strategies. Competitive pressures from FinTechs and non-financial lenders, accelerating legislative changes, dynamic interest rates, and stagnant revenue growth outlook are adding to the growing list of challenges that mid-market financial institutions face.
BankingBook provides coverage across retail and middle-market segments in two broad dimensions:
- Enhanced prospects for growing the business.
- Providing a satisfying customer experience.
We offer superior insight from our models, surveys and benchmarks on customer behavior and product positioning that effect tangible improvements – all in a common language for the benefit of key stakeholders, representing different constituencies.
BRANCH SALES OPTIMIZATION
We apply workforce management analytics, Machine Learning, and robust optimization techniques to focused sourcing and shared services for large scale improvement in branch operating efficiency and service effectiveness. BankingBook focuses on two broad assistance themes, “TOP-DOWN” industry performance comparison benchmarks and “BOTTOM-UP” opportunity assessment to provide banks and credit unions with the information to define and deploy sales roles and achieve higher branch sales productivity.
MIDDLE-MARKET BANKING OPTIMIZATION
Although many middle-market customers seem satisfied with their current banking relationships, that’s no guarantee of success in the future. Banks and credit unions need to realize there are two main forces that could diminish their position in this space:
- Disruptive forces evident in consumer and small-business banking, such as marketplace lending and digital banking, are likely to reshape the competitive dynamics in the middle market as well.
- Banks and credit unions are generally perceived to be competing mainly on price—there are limited products or service differentiation.
Our solution is based on answering four main questions, identified as particularly important by our clients:
- How do other banks and credit unions active in the middle market make decisions on loan pricing and
- Pricing models with limited RM discretion
- Responsibility of LOB business head
- Committee review (e.g. Deals Committees, Credit Adjudication)
- Single-point Loan Portfolio Manager (auto vs manual)
- What approaches are used for credit structuring?
- To what extent has industry specialization – and segment differentiation generally – taken hold in the middle market?
- Given variations across peers and competitors, what organizational considerations and divisions of roles and responsibilities should be considered applicable from a business model perspective?
COMMERCIAL LOAN PRICING
For many years, banks have focused on expanding their product portfolios to gain a larger share of the middle-market segment’s wallet. Treasury, payables management, payroll processing, debt placement, and investment management are some of the many offerings in most banks’ middle-market product suite today. However, our research suggests that in the future, when middle-market firms’ needs become more complex and they are exposed to nonbanks, some of the gaps in traditional bank offerings are going to become more pronounced.
To encourage customers to consolidate their financial needs with them even in the future, banks should start planning for customers’ evolving and more sophisticated financial needs.
Our work focuses on refining middle-market banking strategies by revamping three areas:
With dominance in price-sensitivity volumes, vulnerable brands are scrambling to meet RoE targets. Banks, credit unions, and FinTechs are focusing on strategic pricing as a tool for competitive differentiation and raising profitability. BBA's approach to solving complex pricing challenges is based on probabilistic choice modelling by identifying market structures, brand loyalty, and sensitivity to price changes by developing bespoke offerings in a profit-maximizing manner. Our recommended insights are based on choice experiments and surveys of retail bank consumers.
Our research reveals that price attributes dominate consumer choice, and the trade-offs consumers make among price and non-price attributes are somewhat counterintuitive.
Based on distinctive market characteristics and distribution network capabilities, our comprehensive dataset and tactical tools permit the financial institutions to set goals for product pricing that are sized to its particular market and are consistent with annual sales plans.
In a typical engagement, we begin by quantifying the potential impact of different product and price attributes on consumer choice. We then identify gaps in the communication of value regarding these attributes and highlight differences in choice behavior across demographic and credit segments.
We offer coverage across the entire retail product spectrum, covering chequing accounts, credit cards, and mortgages.
CREDIT UNIONS PERSPECTIVE
Each quarter, we review the public finances of leading Canadian credit unions, diagnosing the state of the credit union industry, and illustrating the leading practices and characteristics of industry winners. To receive a copy of our perspective, email us.
BranchScape can help the management team establish goals for enhancing performance. The financial institution can look at individual branches to determine how to best align the day-to-day activities within each branch with the overall objectives of the franchise.
MortgageRetainer uses a build-up approach for mortgage pricing by considering default, prepayment, and funding volatility risks for each mortgage transaction in the renewal pool. Using advanced Rest API technology, the MortgageRetainer platform also helps managers develop business plans very quickly.
If an organization offered the same “average” price to every customer applying for a loan, low-risk customers would secure better rates with other organizations, while high-risk customers would not. To increase share and stay competitive in a tight market, banks require a strong analytical foundation of RetailEdge.