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Research Study: The Role of Technology in Price Optimization & Strategy

Retail Banking, Price Optimization | Jan 5, 2022
Research Study: The Role of Technology in Price Optimization & Strategy

Pricing is a topic that, here at Nomis Solutions, we are deeply passionate about! Pricing is also at the heart of how our customers manage risk, exchange value with the end borrower, and drive sustained, profitable growth. We recently partnered with American Banker[1] to poll nearly 160 bankers and lenders to learn about their unique pricing journeys. Our respondents were director-level or above with responsibilities in product management, retail banking, analytics, or pricing. In other words, these are the integral roles within an organization that define and implement product strategy and pricing objectives. 

In this study, we asked them about the role that pricing plays in their overall success, how they rate the sophistication of their pricing strategy, and how effective they are in adapting their organization to a customer-centric pricing approach.

As our teams prepared to publish the results, COVID-19 hit and upended the industry. Branches closed, forcing a hasty acceleration of digital distribution, interest rates went down to zero, evaporating interest income streams, and deposits fled to safety, creating excess but unproductive liquidity as lending slowed to a crawl. With revenues and budgets impacted, the question quickly became: How can we do more with less?

While some of these disruptions are temporary, we believe others will be long-lasting. So, as economies and the industry chart their respective paths to recovery, we took a step back to think about how banking and pricing will be impacted. We then went back to our survey responses and found them to be rather perceptive, even amid this “new normal.”

As banks and lenders are now tasked to do more with less, there are three themes from our research that clearly stood out:

#1. Customer-centricity will be the key to differentiation.
Over two-thirds of the respondents believed pricing to be a key success factor for their institutions. With expectations of at least two interest rates hikes in 2022 alone, pricing is back in focus. The banks and lenders that win will not only dig deeper to personalize pricing to customers’ sensitivities and motivations, but they will also take a more holistic, customer-centric approach to offers in order to acquire customers in a smarter way and maintain loyalty beyond their initial interaction.

#2. Better data will unlock the next level of pricing analytics.
Nearly nine out of ten respondents felt that they had a handle on pricing analytics. But while pricing analytics has matured, data—the fuel for analytics—has been left behind. The quest for better data, in real time and in context, is paramount. This rings true especially during times of uncertainty. 

#3. Intelligent and agile digitization will beat slow-moving strategies.
Institutions of all sizes are struggling to remain nimble and deliver personalized pricing and offers at a rapid pace, with survey respondents citing this as their biggest challenge. Pricing and offers remain trapped in risky, manual process and rigid systems; something banks and lenders can ill-afford, especially in the era of “do more with less.” Intelligent digitization is the clear-cut path toward success. The most efficient digitization tool infuse processes with data-driven intelligence, without leaving front-line bankers and lenders out of the loop.

The results of our study are clear. Regardless of organization size, bankers and lenders should adopt agile digitization to close the gap on pricing process challenges in this new environment. Customer-centric pricing is the key to differentiation and to deliver more with less, fintech professionals should lean on modern, end-to-end pricing platforms that effectively eliminate any operational obstacles while keeping the customer top of mind. You are invited to review the detailed findings in full, by accessing the American Banker: Pricing Optimization study below. How does your institution stack up? 


1] Research study was conducted online and completed in January 2020 in collaboration with Arizent/American Banker.