Financial services companies in particular can benefit from big data analytics because their core products are essentially numbers. For them, analytics involves sifting through large data sets to collect characteristics of consumer behavior that will enable them to identify customer segments and quantify their price sensitivity.
These complex calculations require software designed for the purpose.
Big data analytics software can help users manage more granularly the process of defining offers to customers (and the levels of discretion they allow to account managers and sales people to set prices) as well as the terms and conditions of the transaction.
Upon identifying characteristics that influence buyers’ price sensitivity, companies then combine the most relevant factors to present a price that will enable them to optimize revenue and profits from those customers.
Low interest rates and low volatility have muted the need for the capabilities found in PRO (pricing and revenue optimization) software, although financial services companies that have deployed PRO have improved their results measurably.
Technology can enable financial institutions to operate more effectively when interest rates begin to rise and fluctuate.
Despite challenges from disrupters, financial services incumbents are not defenseless. Incumbents have a wealth of information about their about customers, their assets and their past behavior that they can use to optimize pricing in every aspect of their business as well as to improve their customers’ experiences.
Regarding regulation, one advantage that companies using PRO software have in defending against charges of unfairness is that it makes the price-setting process transparent and based on objective measures related to their willingness to pay.
Price and revenue optimization is a strategic business technique that has conclusively demonstrated its value in travel and leisure, retail and industrial businesses. It is steadily gaining traction in financial services.
One advantage of PRO is that it’s often counter-intuitive and therefore offers strategies unavailable to less well informed competitors.
Companies that recognize its advantages and put it into practice can obtain a competitive advantage over competitors that aren’t able to overcome institutional inertia.
Kugel concludes: “I recommend that companies, especially those in the financial services industry, explore the benefits of using price and revenue optimization tools. Our research on the use of analytics in banking and financial services shows that financial services companies are looking for analytics that will improve their decision-making and business processes as well as enhance their operational efficiency. They want analytics to enhance their competitiveness and provide a strategic advantage. PRO is a technology-driven technique that can underlie a more intelligent and strategic approach to pricing.”
Nomis is a fast-growing Fintech software company that combines cutting-edge Silicon Valley approaches to big data, advanced modeling, and deep analytics into the industry-leading price optimization SaaS software platform.