Funds Transfer Pricing: Case Studies

Optimization

Problem: The client had an undifferentiated deposit pricing strategy and wanted to increase volumes and profitability through more focused pricing capabilities.

Solution: The retail practice led the assignment and used precision pricing knowledge and tools to identify maximum volume opportunities for alternative strategies. The risk practice helped to refine the profitability model using funds transfer pricing, operating expenses, and balance sheet strategy tools to develop profitability profiles for alternative strategies. This was accomplished by adjusting funds transfer prices based on customer elasticities, setting appropriate liquidity premia, aligning operating and acquisition costs for each strategy which were all incorporated into a refined pricing model.

Result: The client has new tools to optimize pricing and volumes aligned with strategies that will improve the return to the bottom line.