Mathematical algorithms allow for the development of profit-based pricing strategies that seek to find the right price for each segment, market, channel and product at all times. Price and revenue optimisation (PRO) has been a mainstay in several industries, including airlines and retail, and interest is growing rapidly in financial services.
In the past 18 months, pricing managers at financial services institutions have been building PRO capabilities. Larger institutions should be the first to adopt profit-based pricing and will do so almost universally by 2010, either through modification of pricing engines or as a component of their service-oriented architecture. Smaller institutions will follow suit as PRO technology is incorporated into loan origination systems by technology providers.
Based on research by James R Eckenrode, managing director of the Banking and Payments practice at TowerGroup.(jeckenrode@towergroup.com)
