Achieving a customer-centric business has become even more complex today, particularly with the added emphasis on leveraging analytics and big data, managing regulatory constraints, and the entry of non-traditional Fintech disruptors. Considering the pressure banks now face and the increased choices to which consumers have access, it seems as if serving customers on a true relationship basis has become more of an aspirational goal than a tangible, achievable goal.

The upside is that there are ways that banks can efficiently advance their efforts in developing and implementing their customer centric strategy and I plan to address these methods in the Relationship Base Pricing Strategy blog series, of which this is blog 1. Pricing management continues to be one of the major drivers of customer experience and, if executed correctly (a BIG ‘if’), it can reduce attrition, contribute to relationship expansion and boost revenue and profitability. The conundrum banks face in migrating to more of a relationship-based pricing approach is the dependency on the bank’s ability to break through some daunting barriers that often require extensive buy-in and support from multiple players within the institution.

Based on hundreds of conversations with banking executives around the world, Earnix has identified the following manageable barriers to relationship-based pricing common across the industry:

  • Technology and Data
    • Banks operate too many antiquated legacy systems and data silos that restrict a full view of the customer relationship across lines of business and product lines.
    • Data infrastructure issues limit a bank’s ability to understand customer growth opportunity and how consumers are approaching banking relationships outside of their institution.
  • Organizational Structure
    • Lines of business and product groups often operate independently from one another, making it difficult to consider and market services that address the full banking needs of their customers.
    • Sales goals and compensation can create conflict and competition among internal teams, causing the institution to lose sight of opportunities to deepen customer relationships and use pricing as a lever to drive further engagement.
  • Human Capital and Talent
    • Many banks, particularly midsized and smaller institutions, are constrained due to a limited analytics talent bench and have trouble keeping pace with the larger banks in driving innovation through analytics. This also results from a lack of investment in skilled analytics staff.
    • Given the multitude of banking initiatives that require analytical expertise, analytics talent is often deployed to meet ad hoc project needs which causes other strategic initiatives to be deprioritized.

As net interest margins have declined in recent years and continue to remain low, innovations in pricing management have largely been tabled in their level of priority. However, with increased speculation and justification of a near term federal funds rate hike, progressive banks will need to revisit their approach to pricing. They must ensure that they are prepared to respond to these changes, however incremental, in order to achieve profit targets and surface areas of opportunity and risk among price-sensitive consumers. With this in mind, our goal is to offer banks a chance to position themselves well in a changing industry and environment.

While some banks have proven that customer centricity remains one of their core values, most bankers acknowledge there is room for significant improvement. In this blog series, we will discuss how to overcome these barriers, how banks can help put themselves in a better position to leverage investments in technology to support growth, unlock sources of value within customer relationships, and more effectively use analytics talent to drive success at the product and enterprise levels so they can succeed in the years to come. In addition, I will share insights driven by interviews with banking executives and industry leaders as well as offer banks a series of diagnostic scorecards and questionnaires that can help assess their own organization’s readiness to overcome each of these barriers and pursue their opportunity for growth.