Corporate banking engagements are complex with multiple engagement models that offer the customer the best rates and value for their money while ensuring profitability and long-term relationships for the bank. When it comes to banking deals for the entirety of a corporate entity, a linear approach may not always work. Most corporates have legal hierarchies as well as those not defined by legal terms that may also need to be considered when creating personalized deals. The bank’s revenue management system must be capable of considering linear or vertical relationships as well as non-linear or horizontal hierarchies when formulating deals and offers for corporate customers. This is especially important as non-linear hierarchies are usually complex and present several combinations and computations that must be managed accurately to ensure accurate billing, relationship management, and customer satisfaction. A robust revenue management system must be able to handle these hierarchies seamlessly to prevent revenue leakage and ensure profitability.
In this article, we will discuss the capabilities that a powerful revenue management system must offer to help banks manage and monetize non-linear hierarchies.
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- Enable Group Arrangements: A bank can use its revenue management system to create a group of customers who are not legally bound together. This forms a non-legal relationship and can range from customers who belong to a particular community – for example, a bank in an agricultural region could put together fruit farmers or livestock farmers into a group and apply special tariffs, pricing and offers for them. The bank can define the criteria that allows entities to be part of a specific group and each entity must be able to enter and exit the group easily. This non-linear relationship between customers and accounts can constitute a relationship space that can be used for a range of activities – sharing benefits, invoicing, group level aggregation of revenue and balances, which will in turn lead to better rates on services. In other words, by being part of a non-legal group, individual customers can avail of benefits and rewards that would normally not be available to them.
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- Roll Out Group Offers and Benefits: Once a group has been created, the bank’s revenue management system must be able to create customized offers that provide better price options and benefits for the group members. The collective transaction behavior of the group will benefit them all. There may be disparities in the relationship that individual members have with the bank and individually they may not qualify for the same kind of benefits. But as part of a larger group, they can avail of the offers and prices applicable to the group as a whole and improve their relationship as well. The offers allocated to a group, can even be a mass market offer, which can be further hyper-personalized for them.
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- Undertake Common Negotiations: A revenue management system must be able to manage negotiations and deals. Deals are negotiated and finalized at the group level and the group usually has a primary anchor who can negotiate on their behalf. The negotiated deal and rates are applicable to all group members and are inherited by subsidiaries too. Subsidiaries who inherit this deal, also form a non-linear hierarchy by which they can benefit from common negotiations. By virtue of being a non-linear hierarchy, negotiations done at the group level can be easily propagated to subsidiaries, enabling better control on deal negotiations at the top of the hierarchy.
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- Offer a Common Template: Tailored subscriptions with customized rates can be created as a template and provided to groups such as an association or a closed user group. These templates are usually applicable to customers who have similar businesses – area of focus or even turnover. In this, the pricing for a set of products and services is fixed based on the best applicable rate. This pre-determined model also establishes some reasonable commitments for the customer to adhere to. It bases revenue projections and profitability analysis on these pre-fixed rates. This then becomes an approved template for the bank to apply to customers with similar profiles and business values. For example, a bank can create a template pricing model for business hotels in a specific country. With templates, banks can offer ready packages to targeted segments in a specific business domain without having to create a deal from scratch, thus helping them to develop longer relationships with entities within that domain.
Banking on a Robust Revenue Management Engine
Banks cannot implement, manage, or track any non-linear hierarchy engagement without a robust revenue management platform or a deal management solution in place. They need to be able to register commitments, calculate revenues and profitability, and roll out negotiated prices for various businesses. And they need to be able to monitor commitments, automatically flag discrepancies, manage extensions, and ensure re-pricing seamlessly. They also need to be equipped to handle multiple templates for multiple customer segments. Legacy banking cores lack the agility and scalability to handle these complex demands. A powerful revenue management system can help banks personalize and manage deals for various corporate businesses efficiently.
The banking landscape is facing incredible disruption with increasing competition, changing customer demands, and global events that are adding to the risk environment. Banks now need to tighten their deal management processes and ensure that they offer profitable yet personalized pricing deals to all corporate customers. At the same time, they must be able to simplify the deal negotiation process with some pre-approved templates. This flexibility and efficiency in managing deals will translate into bigger profits and holistic growth.