With interest rates, inflation and competitive pressure on the rise, it can be difficult for lenders to see the forest over the trees. Canada’s big 6 banks have raised their expectations of rate hikes from the Bank of Canada, with the majority expecting another 125 to 150 basis points in rate tightening by the end of the year, as reported by Canadian Mortgage Trends. While this one-two punch can seem grim, current market conditions deliver lenders an opportunity to adjust and strategize. Confronting head-on the challenges of growth, exceptional customer service and competitive differentiations, lenders know it is past time to adopt new tactics.
A dynamic pricing tool could be exactly what’s needed. Consider our recent case study, in which a top 10 Canadian Bank describes how it has leveraged Nomis to increase net interest income by $600,000 per billion, while realizing additional competitive gains via intelligent pricing, optimized renewal management, and discretion guidance for 6,000+ front-line employees.
Combating Margin Compression
Among banks’ leading pain points, margin compression is stunting both this bank’s growth and its ability to deliver an exceptional customer service experience. With the goal of differentiating its mortgage offerings and driving customer growth, this bank launched a suite of specialized loan programs. The bank wanted to provide its customers additional mortgage services tailored to their needs based on borrower preferences and price sensitivity while protecting the bank’s bottom line. Before integrating the Nomis Platform, the bank’s mortgage advisors had blanket authority to issue rate reductions to sign new customers. While an effective strategy in customer acquisition, these rate reductions would overall negatively impact bank profitability. The Nomis Platform was engaged to restore the balance of tailored products for borrowers on the front end, and to restore efficiency and profitability on the back end.
Partnering with Nomis Solutions to reconfigure operations and overhaul the traditional model of mortgage pricing and deal presentment, the bank’s innovative approach leverages data science methodology to price segment for both originations and renewals in the back office. This data science provides accurate intel for this bank to offer the most competitive price on lending products while maintaining its profitability.
Maintaining Growth
With the Nomis Platform, the bank now has capabilities to investigate multiple what-if scenarios for the entire market, and segments of a market, to better understand how customer responses affect the performance of the entire portfolio, allowing the bank to provide its front line more negotiation autonomy, including to create, present and track offers throughout the sales cycle. Overall, Nomis’ sophisticated technology increased transparency across the bank organization, empowering them to offer personalized pricing and manage the negotiation process far more effectively.
The Nomis Platform also features a cloud-based offer presentment and sales enablement module that seamlessly closes the gap between back-office analytics and front-line customer engagement. Allowing the bank to act swiftly on new information and strategize for trends in the marketplace.
Differentiating from the Competition
With efficient pricing discretion management, the Nomis Platform enables banks to identify underperforming branches, regions, market segments and products, as well as meet volume and profitability targets in a closed-loop, end-to-end pricing execution process, effectively staunching unnecessary revenue leakage. The system also captures data about customer interactions, making it available to the pricing desk to create an iterative offer presentment and pricing process that grows increasingly valuable over time.
Presently, Nomis provides the agility needed to adjust and deliver tailored services to each borrower while maintaining its business objectives and profitability. In time, the captured data will provide the bank deeper insights into its business trends and customers preferences/needs, allowing the bank to further differentiate itself from the competition and provide tailored offerings to its clientele in near real-time.
As banks across Canada experience current rate environment constraints, engaging an adaptive pricing tool could be the difference between lenders maintaining or losing profitability this year. Five percent (5%) of mortgage-holders are expected to renew their mortgage in the next 12 months, priming the environment for lenders to test new pricing tools and strategies. Read the full case study about this top 10 Canadian Bank.
