In the next decade, it’s expected that the US housing market will add about 10.9 million new homeowners and 5.6 million new renters—and they’ll be increasingly diverse with more varied needs than ever before.
Creating products that meet their needs will be critical not only to bank growth, but to staying in the good graces of the Consumer Financial Protection Bureau, says David Abshier, managing director at Berkeley Research Group (BRG). At the Banking Growth Forum, Abshier will be explaining why desirable outcomes from the perspectives of customers, regulators and shareholders—views that used to seem irreconcilable—are today moving into alignment.
Abshier will be sharing the stage with London-based Tony Moroney, who leads BRG’s international financial services practice. They’ll be comparing the challenges and opportunities in the US and Europe as lenders aim simultaneously for the triple target of income growth, optimal return on mortgage assets and regulatory compliance. In both markets, says Abshier, banks need to make sure they have advanced analytics in their holster.
“Behavioral analytics are the key to understanding diverse customers at a detailed level so as to better design financial products that truly fit their housing needs,” said Abshier when we spoke recently. He pointed out that the CFPB is increasingly sherrif-ing banks based on their ability to do just that. “It’s not just about process anymore—you can tick off every box in the checklist, but the regulators want to know about the outcome. Were you fair to the customer and did you meet their needs?”
In their Banking Growth Forum session, Abshier says he and his colleague plan to discuss how using analytics for pricing optimization and behavior-based pricing enables lenders to be more fair to customers—including existing customers—and more profitable at the same time. They’ll explain why they believe it’s essential for a much-needed industry-wide shift to more sustainable growth focused on net interest margin and building rather than depleting back-book profitability.