Context

With ever increasing levels of competition in the mortgage market, it’s critical for banks to have a full view of pricing levers. Many banks have a reasonable view of published market pricing and short-term product margins. However, few also factor in lifetime economics, broader customer relationship value, and the elasticity trade-off between price and volume. In markets where price is negotiated, many banks lack the controls required to deliver optimal pricing decisions consistently across the network. Being able to price accurately and robustly is crucial to maintaining/increasing profitability in a competitive environment and address the conduct concerns of regulators.

Core pricing engine based on granular understanding of customer economics and elasticity

Revenue Solution

Our mortgage pricing solution uses sophisticated analytics to determine the optimal price for a mortgage. It takes into account the lifetime economics of the mortgage adjusted for risk and prepayment dynamics; the wider relationship value that comes with the mortgage; and the impact of market price levels and customer elasticity. It delivers this insight to the front-line through a simple and intuitive front-end interface to provide guidance on appropriate pricing levels and a clear set of thresholds for discounting and escalation. It provides the business with a management dashboard to enable regular price setting and adjustment to manage against market conditions and strategic priorities.

Impact

Typical benefits are in the 5-15 bps range blended over the whole portfolio. Over time, as existing stock is replaced by new flow or repriced, this equates to $5-15 million annual revenue upside for every $10 billion of outstanding mortgage balance.