Early in my career as a consultant, several of us sat down with a bank senior vice president. This was before zero interest rate policies, when spreads were healthy. He was a multi-decade veteran of depository services, and his hands were probably permanently stained with MICR (magnetic ink character recognition). We were there to discuss pricing initiatives for commercial services, aimed at reducing exceptions and increasing net revenue.
A few minutes in, he stopped our presentation with a wave of his hand.“Listen. I appreciate all this effort, but services are what we give away to get the deposits in the door. Who cares about the discounts and waivers, as long as the money stays in the bank?”He retired at the start of the 2008 global financial crisis, which changed commercial banking for good. Many others left around the same time. His attitude toward commercial services revenue outlasted him at a lot of institutions.
Where does revenue leakage hide?
That attitude lives on in what we call revenue leakage. It shows up in places such as:
- Customer-specific pricing schedules that are years out of date and still in production
- Waivers granted for reasons no one remembers
- Premium Earnings Credit Rates (ECRs) promised on a handshake by people who have since moved on
- Comprehensive packages still in place for corporate customers whose overall relationships have become unprofitable
The opposite problem exists too. Some customer relationships hold real opportunity, and the bank has never recognized or developed their full potential.
What should a bank expect from its customers?
Banks need deposits, and they need non-interest income. Corporate customers want a broad range of services, delivered quickly and at prices they are willing and able to pay. Partnership is how those needs meet, and partnership takes commitments from both sides.
Banks routinely commit to service levels and pricing to win and keep business. What they get in return is often hazy. A few questions worth asking:
- Is the customer committing to balance levels in exchange for a premium pricing and rate package?
- Are there minimum volumes on key bank services to justify discount pricing?
- Is there a minimum average gross service charge per month?
- Does the customer use only specific service channels?
- Are there maximum volumes on certain product families?
Why is it so hard to track commitments?
Negotiating a commitment is one job. Tracking compliance, remediating shortfalls, and renegotiating as both sides’ needs change is another.
The commercial pricing and billing system sees aggregate balances, service usage, service pricing, and historical trends across the extended customer relationship. It usually does not see credit usage, financial assets under management, foreign exchange (FX) services, or other parts of the relationship.
Without an accurate picture of the total relationship, assessing the value of a partnership agreement becomes more guesswork than science. One or both sides will likely be disappointed.
How does Infor help banks manage commitments?
Infor™ helps banks capture customer commitments, often as early as deal negotiation, and store them in Infor’s enterprise data and analytics platform, Infor Birst™. The platform brings together commercial billing performance data, including data from Infor Complete Billing System (CBS), along with other relevant customer metrics across the bank’s systems.
The result is a configurable 360-degree view of the entire corporate relationship, for reporting and commitment tracking.
What happens between reviews?
Agreements are reviewed automatically on a periodic basis. Between reviews, the system monitors commitment fulfillment, sends configurable alerts to bank staff when needed, and delivers scheduled reports.
Generative artificial intelligence (GenAI) analyzes the full customer relationship and compares its performance with that of similar customers and relevant commercial market benchmarks. The system can also be configured to take remedial action automatically when a customer falls short.
What about customers who exceed expectations?
The platform also flags relationships that are overperforming. A better deal from a responsive bank, offered as a reward for beating expectations, is a welcome surprise for any corporate customer.
What happens at renewal?
When it is time to renegotiate or extend an agreement, the previous contract and any notes are stored alongside the customer’s performance data. CBS modeling can start from that performance history and the existing commitments to build the next offer. If the customer accepts and the bank approves, the offer is implemented automatically.
So, who cares about the waivers?
The senior vice president asked who cares about discounts and waivers as long as the money stays in the bank. It is a fair question when nobody can see what the bank gets in return. Once commitments are captured, tracked, and tied to the full relationship, the bank can tell which waivers earn their keep and which are leakage.
What results did one financial institution see?
One of Infor’s partner financial institutions implemented customer commitment tracking as part of a full 360-degree analysis of customer relationships and rapidly achieved quantifiable results including:
- 7% increase in top-line cash management revenue
- 40% reduction in revenue leakage through improved pricing oversight
- 50% boost in process efficiency, reducing manual errors and freeing up staff time
- Enhanced client satisfaction through transparent billing and strategic engagement
Commitments only pay off when the bank can see what it gets in return.
Learn more about Infor Complete Billing System.
Glen Chancy
Infor CBS Product Director, Infor
Glen has been in the enterprise pricing and billing arena for over 20 years, serving in multiple roles as a consultant, developer, and product manager. He was part of the working groups that created the AFP Global Service Codes, the TWIST BSB Standard, and the ISO 20022 BSB CAMT.86.