Peak-hour congestion is a common issue across many industries. In transportation, roads get jammed during office hours, causing delays. In telecom, networks slow down, or calls drop when too many people use them at the same time. Airlines struggle with uneven demand—during holiday seasons, flights are fully booked, making it difficult to accommodate passengers, while off-peak season flights often have empty seats.
Banks face the same challenge. In the morning, branches are overcrowded, with long queues, overworked staff, and frustrated customers. But by the afternoon or later in the day, the same branch may be half-empty, with idle staff and underutilized resources.
Conventional Mitigation Approach
These challenges can be addressed by increasing the capacity of channels, increasing staff, or opening new branches. In some cases banks leverage agency banking strategy. The State Bank of India, for example, has opened new branches, and is partnering with local agents to expand operations and address the issue of overcrowding at branches.1 But these approaches still don’t address the core challenge of inconsistent demand, as the branches are likely to remain idle once the rush hours are over and still incur high operational costs
A Structured Approach to Managing Inconsistent Demand
Banks can try a simpler and more structured approach for smoothening demand by implementing time-based pricing. Time-based pricing is a structured model where financial institutions adjust fees or offer incentives for specific time periods. Instead of charging a fixed fee for transactions or services, banks can vary pricing based on demand fluctuations, operational costs, and risk exposure at different times of the day. Rather than expanding physical infrastructure, banks can optimize resources by influencing customer behavior and encouraging transactions during off-peak hours.
For example, banks can levy higher fees for branch visits during peak hours, and lower fees during off-peak time to distribute footfalls evenly. Similarly, international payments after a cut-off time may incur additional charges due to processing delays and liquidity risks, while ATM withdrawals at night could have extra fees due to higher security risks. On the other hand, digital banking transactions during off-peak hours may come with lower fees or cashback offers to encourage online usage.
What Will Time-Based Pricing Achieve?
- Demand Smoothing: Demand smoothing in banks is crucial for ensuring optimum resource utilization. Banks operate with limited resources such as staff, counters, and digital infrastructure. When too many customers transact simultaneously, it creates challenges both internally and externally. Internally, staff is overworked, leading to inefficiencies, while high network load increases system maintenance costs. ATM cash replenishments and teller services also experience stress during peak hours. Externally, customers face long queues, which lowers satisfaction and crowded branches. Additionally, third-party payment processors may experience delays.
Time-based pricing can encourage branch visits during non-peak hours through lower fees, and implementing dynamic pricing for peak hours, ensuring consistent demand throughout the day. This reduces system load and improves operational efficiency. The result is a balanced staff workload, optimized system usage, and cost savings.
- Risk Control: Banks face various risks related to fund movements, liquidity, and transaction settlement, particularly during peak hours. Late cross-border payments may require the bank to hold funds overnight, exposing them to exchange rate fluctuations and treasury risks. Corporate bulk payments processed at peak times can also slow down settlement cycles, while ATM withdrawals at night increase security risks for both the bank and customers.
Time-based pricing can help control these risks. By taking extra fees for late transactions, banks can encourage earlier fund transfers. They can also offer incentives for ATM transactions at safer hours to improve security. Additionally, dynamic pricing for wholesale transactions can help smooth out liquidity risks. The overall result is reduced liquidity exposure and improved predictability of transactions.
- Shape Customer Behavior: Many customers still rely on traditional services during peak hours, such as visiting branches for transactions, using tele caller services for inquiries, or withdrawing cash from ATMs. Even digital services can get overloaded during busy times. By encouraging customers to shift these interactions to off-peak hours or alternative channels, banks can help reduce congestion, improve efficiency, and ensure resource utilization.
Implementing higher fees for peak-hour services—branch visits, tele-caller support, ATM withdrawals, and even digital transactions help reduce overload. At the same time, offering discounts or lower fees during off-peak hours makes digital banking and other underutilized services more active. Targeted promotions can further drive adoption, guiding customers toward alternative channels like digital banking platforms or self-service options.
A Technology Powered Approach to Time-Based Pricing
To implement time-based pricing effectively, banks need a flexible, automated solution that can adjust rates dynamically, track customer behavior, and ensure transparency. Such a platform can enable differentiated rates for peak and non-peak hours, configure customized discount schemes to influence customer behavior, and apply relative fees based on transaction timing to maintain balanced demand. It can help banks to create personalized deals that encourage customers to shift to optimal transaction times. It can also engage customers with incentive-based pricing strategies that drive long-term behavioral changes. Banks must opt for a solution that supports multi-country pricing models, enabling banks operating across different time zones to optimize pricing strategies efficiently. Additionally, the solution must be able to track customer behavior and adjust their pricing models accordingly. It must also show customers how fees and incentives are applied, building trust and improving engagement.
As banking continues to evolve in a digitally driven, customer-centric world, time-based pricing offers a strategic, low-cost alternative to traditional expansion methods. With the right technology platform in place, banks can implement dynamic pricing models that are not only fair and transparent but also effective in shaping long-term engagement patterns.