With wealth managers seeing their margins squeezed, has Temenos found a digital silver bullet to help? finews.com asks the Genevan software firm's chief product architect Prema Varadhan.
Prema Varadhan, why would banks need artificial intelligence to price their products – are human bankers unable to do this anymore?
Temenos' enterprise pricing enables banks to create a centralized product catalog for all products across the enterprise in one single repository. Utilizing artificial intelligence, the banks can leverage data in real-time to create and manage new and innovative products at the right price point.
For example, with value-based pricing, allowing banks to determine the pricing based on the total customer value to the bank across the enterprise.
Is the pricing power of incumbent banks generally waning?
Retail banking has become increasingly subject to low-profit margins, driven by the twin threats of high customer attrition rates and financial disintermediation.
The ongoing threat of the loss of clients and funds, along with the changing market environment, creates fundamental problems for banking operations.
«Personalized bundles will help revenue and profit»
Nonetheless, in this challenging environment, there are opportunities to generate growth, which are enabled by technological advancement. Retail banks can increase their revenues and become profitable by creating personalized products and bundles that will better target and serve their customers’ needs.
Temenos «value benchmark» has shown that banks with high personalization capabilities have a 6 percent higher return on equity. Banks that are more profitable also have better time-to-market.
When algorithms are taking overpricing, will price-tags also begin to float in banking as we see it already in retail?
Powered by AI, Temenos' enterprise pricing allows for true personalization, enabling dynamic pricing across multiple dimensions, servicing the «segment of one». It also gives banks the ability to continuously apply and optimize the pricing structures.
Neobanks with low or zero fees are mixing things up in the payment sector. Can Temenos' tool counter this development?
Temenos' enterprise pricing helps banks to generate revenue more quickly, and to create innovative products that can be delivered via multiple channels and distributed through third parties, for example with open banking.
Would Temenos sell the new tool also to fintechs and neobanks?
Temenos' enterprise pricing is for banks with multiple cores or product systems, which lack a single source of truth and result in delayed product lifecycles.
This helps them to be competitive with more nimble challenger banks, to create and manage new and innovative products without the immediate requirement to modernize their core systems.
In Switzerland, retail banking fees are surging. Do the incumbent banks risk alienating and losing customers due to this?
In the aftermath of Covid-19, many industries want to «build back better» rather than return to business as it was before. Banks should do the same. Their customers have been forced by circumstances to embrace digital banking. It’s up to the banks to compete on experience making it as personal, engaging and rewarding as it can be.
«Fees can be justified if the offering is right»
Fees can be justified as long as banks are offering the right products at the right price point with a personalized experience. This transition to a customer-centric business model will help banks build customer satisfaction and trust to attract and retain customers and drive growth.
How will the new tool help banks with customer retention and share-of-wallet?
Temenos' enterprise pricing enables banks with complex technology landscapes to design, introduce and manage personalized banking products that are composed of capabilities spread across multiple underlying systems.
They can be brought quickly to market without the need to conduct complete system transformation programs. The solution helps banks to generate revenue more quickly, and to create innovative products that compete with new offerings from new market entrants as well as more established competitors.
Prema Varadhan is chief product architect as well as head of artificial intelligence at Temenos. Based in London, Varadhan has worked for the Swiss banking software firm since 1999.
