Context
Bank pricing in the small and medium-sized enterprises (SME) segment is challenging: it is a relationship business with relatively complex economics; market pricing is opaque; and pricing is delivered through a distributed network, often with significant price discretion. It often relies on fragmented systems and data sources. This means it is difficult to both determine the optimal price for any given client or transaction and to drive consistent delivery throughout the business.
Revenue Solution
To combat these issues, we have developed an integrated pricing and portfolio solution which can be used to price individual loans and manage the portfolio of SME clients. Our solution draws on the advanced risk and economic analytics within our Credit Suite – including multi-year IFRS9 expected loss forecasting, behavioral exposure forecasting and regulatory and economic capital requirements. It combines these with the bank’s pricing policy, internal and market pricing benchmarks and elasticity modelling to support pricing of new loans and re-pricing of existing facilities, and to assist account managers in structuring deals to best support client needs while meeting the bank’s economic returns.
In addition to pricing of single clients/facilities, the solution provides a portfolio management tool to allow account managers, regional managers and central teams to drill into performance and pricing of the client base and prioritize actions.
The Python engine with an intuitive front end, makes it easy to gain insights quickly and easily. Multiprocessing and caching features makes the solution highly scalable and capable of handling large datasets..
Impact
Our solution delivers impact in several ways: improving price-setting for new business by optimizing for economics and demand; improving price delivery at the front-line through a single, consistent tool; identifying pockets of underperformance within the portfolio and directing targeted actions to improve returns; and increasing the overall transparency, efficiency and flexibility of the pricing system.
