Change in financial services will be sweeping, but there is time to figure out new models if banks act now.
San Francisco, CA (PRWEB) April 17, 2015
Nomis Solutions, global pricing and profitability technology provider for the financial services sector, and its partners, have concluded their annual Nomis Forum in San Francisco where theme Keep Calm and Be Prepared was underscored by insight as to how banks can innovate and partner with alternative finance providers while anticipating interest rate rises.
Some key insights included:
- Facts around how “peer-to-peer” lending is increasingly gaining market share and the need banks have to innovate or partner to provide more customer convenience as start-ups change the game, were relayed by UC Berkeley Professor Richard Swart, an expert in alternative finance. The alternative finance models, backed largely by institutional funds rather than true “peer-to-peer” sources, have attracted capital that previously did not flow to financial vehicles that served the general public, but now more traditional sources including banks are joining this movement as financial leaders seek out methods to better serve the public and increase returns.
- An understanding that change in financial services will be sweeping, but there is time to figure out new models if banks act now discussed by Nomis founder, Dr. Robert Phillips, now a professor at Columbia University. Dr. Phillips revealed how disruption happens and defined how the ability to price new products and new classes of risk as well as developing faster business processes are key skills banks will need to compete effectively.
- A call to action for banks by Fred Brothers, Executive Vice President & Chief Innovation Officer at FIS, who implored banks to begin to rethink everything, comparing the impact of the Internet on retail to what will soon happen to banks. In short, he outlined how everything will change, and how understanding data, including price, will allow winning banks to offer the products and advice people want.
- A discussion of how banks should prepare for rising interest rates and the risks and opportunities that rising interest rates pose to both asset and liabilities pricing. In particular, banking executives discussed deposit flight risk, timing of pricing changes, and analytic approaches to empirically measuring interest rate sensitivity down to customer micro-segments.
- An overview of how fair pricing is not only important to regulators, but also to banks as a tool for understanding and customizing offers to segments and individuals. Mark Kenney, Chair at law firm Severson & Werson, explored a three-tier framework of fairness that includes contract law, regulation, and reputation. He also explained how systematic software-based price optimization can help banks prove fair, objective modeling based on risk and price sensitivity.
- Finally, Jason Bilodeau, a financial analyst with Macquarie Capital, shared how he evaluates banks and described how banks can partner to more rapidly understand and adopt new models while leveraging their customer insight and their distribution networks to turn these relationships into significant business opportunities.
Frank Rohde summed up the conference by underscoring the importance of optimized pricing of assets and liabilities for banks. As new entrants capture market share for both loans and deposits, and banks navigate a changing interest rate environment, three key levers will enable both traditional banks as well as alternative finance providers to optimize returns:
1) Increasing granularity and rapid micro-segmentation of the market to ensure that each customer receives the optimal price / value proposition.
2) Continuous in-market testing of new price / value propositions to ensure that banks understand the changing competitive environment and changing consumer demand and behavior. This is especially critical as the last few years of consumer behavior is not going to be predictive in an environment of increasing interest rates.
3) High velocity pricing: the ability of banks to change interest rates and fees in response to changing market conditions, interest rates, and consumer preferences, all within the constraints of consumer fairness.
Implementing pricing technology to enable these three levers is critical as banks compete in the new market realities.
Over the course of 2015, Nomis will continue connecting new market entrants and traditional banks in the conversation of how to properly price an increasing array of new products. Its mission is to make the ability to price fairly and competitively for the unique needs of micro-segments a universal skill in the banking and alternative finance industries.
Further insights from Nomis Forum 2015 can be found on Twitter by searching the hashtag #NomisForum15.
Nomis Solutions provides best-in-class pricing and profitability technology for financial services companies. By combining a big-data platform with advanced analytics, innovative technology, and tailored business processes, Nomis delivers quick time-to-benefit and improves financial and operational performance throughout the customer-acquisition and portfolio-management processes.
In 2014 Nomis customers optimized over $1 trillion in banking transactions and since inception our customers have generated over $1 billion in incremental profits.
Headquartered in San Bruno, CA, Nomis Solutions also has offices in Toronto and London. Visit http://www.nomissolutions.com or contact us at info(at)nomissolutions(dot)com or 1-650-588-9800 or +44 0207 812 7251.