3. Our objectives today
Zafin - Confidential 3
Looking at these pressures with a customer-centric lens to
drive revenue
1. A key lever to respond to these pressures is pricing excellence
2. The role of a pricing framework in the context of conduct risk
3. Influencing behaviours of both staff and customers to align with the
bank’s objectives
4. Importance of looking at pricing strategically vs. tactically to mitigate
conduct risk
4. Zafin provides relationship banking technology solutions to financial services
providers. Our platform, miRevenue, delivers customer-centric product
innovations that drive revenue, transparency and operational efficiency.
RELATIONSHIP BANKING
Design
Price
Offer
Bill
6. Conduct risk: Different views
Zafin - Confidential 6
• Not typical risk categories, such as market, credit, liquidity
and operational risk
• In essence, risk attached to the way in which a firm, and its
staff, conduct themselves – customer treatment, staff
remuneration, conflicts of interest
• Consider risk culture, values, integrity, behaviours,
attitude, reputation
7. Conduct risk: The consequences are staggering
The risk of staff acting unprofessionally,
unethically or illegally, leading to a risk in the
delivery of fair customer outcomes:
§ Poor standards of behaviour
§ Failures in operational controls
§ Benchmark rigging/market manipulation
§ Product mis-selling
§ Excessive fees
§ Sanctions busting
§ Failures in AML procedures
§ Rogue/insider trading
£26B
fine for
Lloyds
$8.9B
fine for
BNP Paribas
$65B
fine for
Bank of America
$42B
fine for
JPMorgan
8. Why is it important to manage conduct risk now?
Zafin - Confidential 8
• Aside from the fines, a bank’s reputation can be a
competitive advantage
• Banks’ recognition that failure to “clean up their acts” will
lose them customers, as well as reputation
• More and more, clients are looking for more information
from banks around how they manage conduct risk
11. Tier-1 global bank: A centralized deposit rate engine
Zafin - Confidential 11
• A fragmented, decentralized approach to managing corporate deposit rates
• Key driver: Conduct risk from localized controls/manual process
• Implemented a centralized, fully-automated rate management framework at a
global level
• 10+ countries, 19 currencies, 28 market rates, 250+ individual price points
• Substantiate the basis on which clients are paid interest
• Demonstrate transparency and fair outcomes to clients
• Audit trail of all rate changes for regulators
• Other benefits: Help drive liquidity, drive net interest income
13. PRICING STRATEGY
“In order to develop a successful strategy, you
have to have an organizational structure that
makes pricing and revenue management a priority
for the organization.”
-Chrystal Pozin, Consultant, Treasury Strategies
14. Pricing strategy meets execution: Best practices
Structure and buy-in – people, processes and accountability
Understand who
your customer is –
their goals, needs
– be a trusted
advisor
Nail your
bank’s value
proposition –
what makes
you different
Link pricing to
broader bank
strategy, goals,
segments, markets,
revenue,
behaviours
Automate a
pricing
governance
structure –
incentivize the
behaviour
Iterate and
adapt with
agility – link back
to understanding
client needs
15. Why pricing governance matters: By the numbers
5-10%
lift in net revenue
from focused
repricing efforts
17%
of clients are
unprofitable on a
variable basis
20%
of client contracts
haven’t been
revised in 10 years
<$250
contested fees are
waived outright:
one bank’s policy
0
clients leave
because of a
price increase
33%
price increase over
10 years (based on
3% inflation)
~15%
of annual revenue
can be lost
due to leakage
Source: BCG, The Seven Deadly Pricing Sins of Corporate Banks; Treasury Strategies; Zafin
$2 mil
Cut from a bank’s
annual opex costs
for price changes
16. Using pricing to influence behaviour: Focus on the “E”s!
Bank staff:
§ Educate on what good
behaviour looks like
§ Examine profitability – who
is and who is not
§ Empower product managers
to innovate – understand
needs and advise
§ Equip the sales team to
communicate value
§ Establish compensation
based on good behaviour/
culture
§ Enforce approval workflows
Corporate customers:
§ Educate on what good
behaviour looks like
§ Encourage profitable
behavior – e.g. lower-cost
channels
§ End unprofitable behaviour
– high-cost behaviours will
come with higher fees
§ Energize the relationship –
help to grow business
§ Expand the relationship
over time
17. Bring it all together:
Driving revenue with
Customer Lifecycle
Management 17
18. Customer Lifecycle Management
Product and pricing innovation at each stage of the corporate banking relationship
Product Manager:
§ Create new product
innovations, including
eligibility, features and
bundles
§ Define fee structures
and standard/exception
pricing
§ Create promotions
Relationship Manager:
§ Understand customer’s
product and pricing needs
§ Prepare an offer/proposal or
RFP response
§ Create, negotiate and agree
to contract with customer
§ Record historical win/loss
record for future use
§ Onboard: Operationalize,
implement and validate the
contract
§ Automate pricing
governance
§ Automatically compare
customer activity to
contractually-agreed terms
§ Automate the
creation of invoices and
billing statements
§ Cater to customer billing
preferences (e.g.
hierarchies, addresses,
formats, etc.)
§ Clearly communicate the
value of the relationship
Role-based entitlements, approval workflows, reporting and audit log
Over time, the cycle repeats: Changing market dynamics, customer needs, customer profitability, etc.
Design Acquire Fulfill and track Bill
20. EXECUTING PRICING
“Banks can have the best pricing strategy ever, but if they
don’t have a way of engaging the sales team, it falls apart
and fails … You’re better off with a mediocre strategy that
is really well-executed with collaboration between sales
and product, than with brilliant strategy that is disjointed
between the two teams.”
-Dave Robertson, Partner, Treasury Strategies
21. Rich Meiklejohn
CEO, Asia-Pacific
rich.meiklejohn@zafin.com
www.zafin.com
Thank you!
Subscribe online:
www.zafin.com/journal
Questions? Comments? Ready to learn more?
§ Visit Zafin at booth O41
§ Contact me directly at any time
§ Check out the Sibos 2015 edition of
Relationship Banker
§ Check us out online at www.zafin.com
