The banks that will not just survive but thrive will be the ones that create value for their customers by forging strong, lasting relationships with them.
To do this, banks must rethink pricing: It all begins with the lender/customer interaction and works backward from there.
That’s what we believe at PrecisionLender. It’s something we feel so strongly that we were compelled to put our philosophy into words, in this book.
Banks were once associated with “It’s a Wonderful Life.” Now it’s “The Big Short” and “Too Big to Fail.” And they’re facing a new world of greater regulation and stiffer competition. To survive, and even thrive, banks have to rebuild their brands – one customer relationship at a time.
The key to creating stronger customer relationships with customer is pricing. But why? Just how much can improvements in pricing impact your bank? Where can those improvements be found? And what does it look like when you start to move the ball forward on pricing?
There are two dimensions to pricing: Price Setting and Price Getting. Banks usually prefer to focus on Price Setting, but that doesn’t mean they’ve all mastered it. What are some of the common roadblocks bankers encounter in Price Setting? And why should we never let perfect be the enemy of good?
How good are banks at actually booking that price after they set it? In other words, how good are they at Price Getting? And how can banks get better at Price Getting in a way that builds relationships and positively affects their brands?
To compete in this age of rising customer expectations, banks must take steps to shorten their lending timelines and be more creative with the options they offer borrowers. To do that, they must move the pricing process from the back of the bank to the front.
Banks have all sorts of C-suite officers from chief executive officers to chief risk officers to chief loan officers. But for some reason, there’s no chief pricing officer.
There really should be.
Great lenders can have a tremendous impact on a bank’s performance. What if great lenders are made? What if we can train and develop the next generation of stars from within our own ranks?
Choose transparency. When you give out information rather than hoarding it, you empower your lenders and gain the trust of your customers.
Banks spend much of their total technology budget on maintaining core systems, but that is not where value is created.
Buying technology at a bank can be a frustrating, even intimidating, experience. But it can also pay off handsomely, if you know the pitfalls to avoid and the right questions to ask.
It doesn’t matter how good your pricing tool is if you can’t get your lenders to use it.
To get that buy-in, you need to create a culture that embraces change. Then you have to lay the groundwork in training so your lenders engage with the new tool, instead of revolting against it.
If changing your bank’s pricing culture, tactics and tools seems overwhelming, that’s because it is.
But it’s not impossible if you harness the power of continuous improvement.
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Carl Ryden, Co-Founder and Chief Executive Officer of PrecisionLender, has deployed pricing management solutions in hundreds of financial institutions ranging in size from $50 million in assets to over $180 billion in assets. In addition to his work in authoring and developing PrecisionLender’s loan pricing system, Carl actively provides strategic consulting to PrecisionLender clients.
His breadth of experience and passion for technology, finance, strategy, and software development enable him to address risk-based pricing from a unique perspective. Carl has an MBA from MIT Sloan School of Management, a Master’s Degree in Electrical and Computer Engineering from MIT and a BS in Electrical Engineering from NC State University.
Dallas Wells, Executive Vice President Client Development at PrecisionLender, is a banking industry veteran. He has held roles as a commercial lender, CFO, and ALM/Derivatives Consultant, working with banks of all sizes in markets around the country. He has expertise in capital planning, liquidity forecasting, investments, pricing, and interest rate risk. At PrecisionLender, he specializes in helping clients use pricing to improve performance and reduce risk.
Dallas graduated as a Danforth Scholar from Washington University in St. Louis with a BSBA in finance, and is also a graduate of the Southwestern Graduate School of Banking at Southern Methodist University.
Jim Young, Director of Communications at PrecisionLender, is an award-winning writer with experience in a range of positions in media and marketing, from reporter to website editor to content marketer. Throughout his career he has focused on the story – how to find it, how to understand it, and how best to share it with others. At PrecisionLender he manages the many ways in which the company shares its philosophy on banking and the power of relationships.
Jim graduated Phi Beta Kappa from Duke University and holds a Master’s Degree in journalism from Columbia University.