Financial Regulatory services news Without this 360° view, it becomes very difficult for banks to offer customers pricing based on the entire relationship. At the same time, banks cannot fully anticipate new products or trends, respond to mounting regulatory demands, strengthen brand loyalty or offer new solutions to today’s more complex marketplace. Yet gaining this 360° view is no simple matter. Operational silos make it difficult to achieve a holistic view of customers, as do rigid and hard-to-integrate legacy billing and transaction systems. As a result, pricing is inflexible and sometimes irrational, financial institutions experience revenue leakage, customer service agreements remain unenforced and customer confidence erodes. This situation also prevents corporate treasurers from clearly determining the overall cost of their relationships with their banks. This is particularly challenging for large companies that generate a significant amount of business for their financial institutions. These companies want to understand the nuances of their bank’s pricing structure and have full fee transparency. They want to be rewarded for all the business they do with a financial institution—not just for purchasing a single product or operating in a single geographic region. Without access to appropriate packaged and bundled relationship pricing, corporate treasurers and CFOs are not rewarded for bringing more business to the bank—at least not in a consistent or managed fashion. For this to change, banks need to determine how to: ◉◉ use the rich data they have accumulated to offer holistic customer pricing that rewards loyalty; ◉◉ develop accurate bills based on the entire range of products customers use; ◉◉ optimize pricing and billing without replacing or retiring mission-critical technology; ◉◉ augment their lending-based models with a fee-for-service based model.
In response to these needs, new technology solutions are now available that consolidate data from a variety of siloed systems to deliver a more holistic view of customer behaviour. More flexible technologies provide visibility into a
Spring 2014
financial institution’s plethora of legacy applications, enabling complete product and pricing lifecycle management for a customer. By consolidating the entire customer relationship into a 360° view, banks can engage in more intelligent modeling based on profitability, offer more targeted products and enhance their billing processes. Relationship managers can review customer accounts in minutes, rather than taking weeks or months to consolidate disparate data sources. Similarly, product managers can more easily determine which contracts are in danger of breach. By supporting new product rollouts, these next generation solutions also position banks to improve customer service. By gaining visibility into the total value each customer generates, banks can begin to offer value-based pricing—essentially rewarding the best customers. This allows financial institutions to reduce their dependence on lending spreads by augmenting revenues with fee-based income. By mining their rich warehouses of client financial data, financial institutions can offer products customized to particular client needs, positioning them to differentiate from the competition. It also empowers them to price based on relationship-driven criteria as opposed to ad hoc product driven initiatives. For their part, corporate treasury departments gain a more accurate understanding of their bills and can begin getting credit for all the corporate business they drive, no matter where it originates. By accessing a shared 360° view of their product data, they can also make more informed spending decisions. With this kind of program in place, both financial institutions and companies can assess the ROI of any relationshipbased pricing initiative. Banks no longer have to delve into lengthy and expensive annual pricing changes gated by IT or modify legacy code to make product pricing changes. Instead, they can proactively model new product offerings to improve both cross-selling and up-selling opportunities. They can create reward programs that incent corporations to buy specific products of interest to them—
increasing both wallet share and customer satisfaction. And they can begin to retire older systems and measure personnel based on profitability and customer satisfaction, rather than inconsistent or subjective metrics. At the same time, rather than sifting through countless bank statements and invoices to capture consolidated data, corporate customers can see transparent electronic bills that comply with new processes released by the Transaction Workflow Innovation Standards Team (TWIST) for bank services billing. Treasurers can also reap financial rewards by consolidating their financial relationships with the bank best prepared to offer the most favourable pricing and billing options. A strategic pricing and billing platform is a critical component of any bank offering, particularly for banks engaged in global transaction banking and cash management. To remain competitive, financial institutions should begin by benchmarking their pricing and billing platform against best-in-class solutions. After uncovering gaps, organizations can size the opportunity, assess the consequences of inaction, identify the capabilities required and then determine a strategy. Regardless of the stage they are at, one thing is clear: financial institutions need to take decisive action to ensure they do not price themselves out of the market. Jonathan is a manager within Deloitte’s Corporate Strategy Consulting practice and has over eleven years of growth, product, channel and marketing strategy experience in the financial services industry – specifically payments. Jonathan works primarily with payments and retail banking clients to develop and execute strategies to increase their market competitiveness. Chris is a thought pioneer in the space of Product Lifecycle Management for Financial Services and has spent over 16 years in the software industry focused on banking solutions. Chris is passionate about his family of 4 kids and wife of 22 years. David is a Partner in Deloitte’s Strategy and Operations group. He has over 20 years of experience in Financial Services and has worked with leading firms around the world to define their strategies and improve operations across a broad range of functional areas including payments, cash management, trade finance and commercial banking.
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