Alistair Netwon and Kristin Moyer here. Customers have come to expect the ability to compare prices for goods and services that they utilize in their everyday lives. As they book airline flights, decide on what television set to purchase, consider a prospective car purchase, or decide on what car or home insurance policy to take out, in many situations consumers will refer to Web-based price comparison and review sites to help them make those financial decisions.
Pricing transparency in banking is already increasing rapidly (Gartner customers see “How Banks Can Work in a More Transparent Ecosystem to Win Profitable Business“), and along with it the potential for disintermediation. Price comparison Web sites (such as Pricing Central and moneysupermarket.com) have become an everyday part of many financial services environments and generally rank products by price or rate (Gartner customers see “Social Banking: It’s All About the Money and Customer Focus“). Personal financial planning websites (such as Mint and Wesabe are increasingly offering consumers recommendations as to the most cost effective lending products available to them. Interhyp compares banking rates for mortgages and takes over a lot of the process fro the customer. The brand of the bank is pushed to the background.
Banks will need to adapt their pricing strategies to this new, more transparent environment in order to combat disintermediation. Transparency will lead to the ability of customers to negotiate pricing – which implies the need for pricing flexibility on the part of the bank. For example, a customer may approach a bank cashier to obtain a loan or credit product. However, with greater price transparency, either through a previous web search or directly to their mobile phone, the customer will likely have access to a full range of comparatives rates from competitor banks. This will lead to the start of customer-facing price negotiations in lending.