The State of Commercial Banking: January 2023 Market Analysis. Access the on-demand webinar


Building a Pricing Ecosystem

What does a pricing ecosystem look like? To start, let’s back up and take a look at the typical building blocks banks have in place.

The Heart vs. The Brain

How do banks really add value? How do they make money? Those questions should not only have easy answers, they should also be the driving force behind the bank’s most important strategy decisions. So why aren’t more banks pointing resources to the systems that help them get better at those two things?

The Heart

The answer, unfortunately, might just lie with the marketing genius who decided to name the bank’s accounting software the “core system.” Every bank we’ve ever talked to has a love/hate relationship with their “core” and the vendor that supports it.

The issue is that we are asking these systems to do things they were never designed to do. Core systems were built for debits and credits, making sure that everything balances and that we don’t lose any pennies. They are the epitome of a commodity in the banking business in that there is really no way to differentiate based on them. Keeping track of transactions and balances is the absolute minimum requirement, and everyone ends up delivering the same end product to the customer (an accurate accounting of transactions).

So, yes, the core is vital, which is why we call it the “heart” of the bank. You have to have it, and its job is to circulate basic but essential elements to the other parts of the bank. But, it was NOT designed to be a central data warehouse from which we can manage the bank.

The Brain

The brain is the collection of systems and processes where banks make decisions that generate real value and returns. Here’s what it looks like when those tools are put to work closing a valuable deal.

Generally, the sales process is tracked in some sort of CRM system, you negotiate through a pricing and profitability tool, and then the deal runs through various workflow systems (underwriting, doc prep, etc.) to get to closing. After it is on the books, the same CRM and underwriting tools will be used to service and manage the loan, and you will use other portfolio level resources to measure the profits and risk so that the bank can adjust strategy where necessary.

This is an excerpt from the book, "Earn It"

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