Banks worldwide are working to implement digital solutions that increase productivity and access to information. The competitive advantage is clear: digitization is a clear path to margin improvement.
Digital pricing is the centerpiece of that effort, because pricing is so critical to a bank’s margin and profitability.
A digital pricing solution gives every bank new tools to be more competitive. It’s clear that those banks that continue to use outdated manual processes will fall behind.
The bottom-line benefits are quantifiable – in terms of ROI, basis point improvement, and faster deal submissions. Banks are reaping competitive advantages, streamlining operations, and boosting profitability with this singular digital initiative.
Digital Pricing is a Necessity in the Modern Bank
What’s the telltale sign of a bank that has problems with pricing consistency, accuracy, and compliance? It’s the reliance on manual pricing spreadsheets to price even the bank’s largest deals.
When your Relationship Managers (RMs) are spending time manually inputting data into a spreadsheet – rather than building client relationships — there’s a huge missed opportunity to streamline your processes.
When your portfolio or finance teams don’t have real-time access to deals until quarter- or year-end reports, you missed the chance to more profitably shape your portfolio in real-time.
And when a compliance audit causes your staff to have to dig through emails and spreadsheets to reconstruct how the pricing of a deal changed over time, those wasted hours are dragging down productivity.
Digital pricing solutions have been steadily enhanced over the last 15 years. “It’s no longer a “nice to have” – it’s become a competitive necessity. Here’s why this proven tool should be on every bank’s digitization roadmap in 2020.
Improves Customer Relationship Profitability
Many banks say they want to increase customer profitability. But without a digital pricing solution, your front line is doing that job inefficiently by manually looking up customer information and overlaying profitability analyses from another system.
The best digital pricing solutions will integrate with your CRM and other bank systems, to give your RMs a complete view of each customer. Suddenly, RMs can easily reprice existing products and evaluate new deals based on their impact on overall customer profitability. They easily calculate the required fees and margins to hit target. And your RMs can easily uncover new cross-sell opportunities to deepen your bank’s share of each customer’s spend.
Equips Decision-Makers to Make Faster and Smarter Decisions
Relying on legacy systems like Excel or siloed pricing solutions makes more complex pricing strategies difficult. A digital pricing solution equips your front line with better data and new tools to propose smarter deals.
A digital pricing solution puts Artificial Intelligence and Machine Learning to work – helping your RMs construct, evaluate, and propose more profitable deals. RMs can compare different deals side by side to see the impact of various possibilities on customer profitability. They can get recommendations for deals and view benchmarks based on final booked prices, not just draft/approved pricing.
Digital pricing helps most banks improve margin on every deal. RMs gain more time to work with customers. And your customers get approvals faster, giving you a competitive advantage.
Gain Control and Consistency in Pricing Across the Bank
Without digital pricing, most banks lack consistency in pricing across branches, and may price customer deals differently for the same risk.
A digital pricing solution focuses your front line on risk-adjusted return. You can set pricing targets, hurdle rates, or return on capital goals and deploy them across the bank.
Everything is priced consistently within the digital pricing solution. You gain control of the risk-adjusted pricing process, while RMs are better able to quantify risks.
You reduce the number of manual processes, so you improve accuracy and remove the chance of data input errors. (Some banks spend money to manage basis point leakage errors through manual data entry – but that’s a patch, rather than a solution to the underlying problem.)
Improves Portfolio Profitability with Pricing Transparency
The more advanced digital pricing solutions give RMs and portfolio managers a real-time view of every deal, so they can optimize the portfolio as it’s being created. They have complete transparency into deal pricing – including the final approved and accepted price — and can actively manage pricing targets.
Your finance team gains a real-time forecast of profitability without having to wait until quarter- or year-end to look backward. Digital pricing allows them to forecast profitability based on deals in the pipeline.
Streamlines Regulatory Compliance
Regulations in banking are only increasing, making compliance a much bigger headache for every bank.
State-of-the-art digital pricing systems will track granular data for every deal at each step in the pricing process. That gives your bank a full audit of decision making and how pricing changed over time. Compliance audits no longer drag down the entire salesforce. Managers can access the data needed and streamline the entire compliance effort.
The fast pace of improvements in technology is changing the expectations of the next generation of bank clients. Financial institutions that fail to get ahead of the digital curve will become uncompetitive and face narrower paths to profitability.
A digital pricing solution can help every bank maximize revenue potential and improve margins. The year 2020 is the year to give your bank that competitive advantage.
Brilliance Financial Technology is the creator of DealPoint, the only integrated digital pricing solution tailored to each bank’s pricing models. The solution uniquely captures granular data at every step in the pricing process, and supports highly complex product lines and pricing models.