“Pricing isn’t just a number; it’s the single most powerful driver of profitability and competitive advantage in today’s financial landscape.”
In the financial services industry, pricing remains an underutilized strategic tool. While senior management often prioritizes operational efficiency or market share, pricing holds unmatched potential to transform profitability. Studies, such as those by BCG and Dolan & Simon, have demonstrated that a mere 1% improvement in pricing can result in an 11.4% increase in operating profit—far surpassing the impact of improvements in expenses or sales volume. Yet, pricing is frequently overlooked as a driver of strategic transformation.
The Untapped Potential of Pricing
In an era where personalization and data-driven strategies dominate, traditional pricing methods like cost-plus or market-matching strategies fall short. These approaches ignore the critical nuances of customer value perception and willingness to pay (WTP).
“Pricing is not just a reaction to market trends—it’s a proactive strategy that aligns customer needs, competitive positioning, and profitability.”
By leveraging pricing as a strategic lever, financial institutions can differentiate themselves, capture untapped revenue, and unlock sustainable growth. The challenge lies in evolving from static pricing models to dynamic approaches that integrate WTP insights with profitability strategies.
Willingness-to-Pay: The Missing Link in Pricing Strategy
The true power of pricing lies at the intersection of profitability-based models and elasticity models that bring willingness to pay insights. Integrating these two dimensions can revolutionize how financial institutions approach pricing.
- Precision through Segmentation
“Not all customers are created equal, and neither should their prices be.” Advanced segmentation informed by WTP allows institutions to offer differentiated pricing for diverse customer groups. For example, premium clients may value bespoke advisory services and accept higher fees, while younger customers may prioritize affordability.
- Data-Driven Personalization
With the rise of data analytics, financial institutions can estimate WTP with unprecedented accuracy by analyzing transaction histories, behavioral trends, and competitive benchmarks. This enables real-time price adjustments tailored to individual customer profiles, improving both revenue and customer satisfaction.
- Defining an Efficient Frontier for Pricing Outcomes
“Combining WTP with profitability-based pricing creates a framework for identifying optimal outcomes.” By considering both profitability and customer willingness to pay, organizations can define an efficient frontier—a set of potential outcomes where the trade-off between volume and profitability is optimized. This allows decision-makers to evaluate strategies more clearly, balancing volume growth with margin maximization.
However, not all strategies require a trade-off. A common misconception within organizations is the assumption that increasing volume must come at the expense of profitability or vice versa. This assumes the company is already operating on an efficient frontier. The reality is that most organizations, due to underdeveloped pricing capabilities, are operating below this frontier.
“The opportunity lies not just in managing trade-offs, but in moving toward the efficient frontier itself.” By leveraging granular insights and refining pricing strategies, organizations can achieve win-win scenarios, improving both price levels and volume simultaneously. This approach challenges the belief that pricing adjustments are a zero-sum game and highlights the untapped potential within suboptimal pricing portfolios.
- Dynamic and Predictive Pricing
Using tools like AI and machine learning, institutions can simulate pricing scenarios to optimize outcomes. “Imagine testing the impact of a 5% fee increase under competitive and economic variations before rolling it out—this is the power of predictive pricing.”
Technology: The Catalyst for Pricing Transformation
“The future of pricing lies in the seamless integration of advanced technology and human expertise.”
AI-powered tools, such as reinforcement learning models, enable continuous adaptation to market dynamics and customer behavior. These technologies empower financial institutions to move away from static pricing models and embrace dynamic systems that respond to real-time changes.
During my tenure at Banco de Crédito del Perú, we implemented a cutting-edge pricing platform that became a cornerstone of our pricing transformation strategy. By integrating WTP analytics, profitability models, and AI-driven insights, we achieved among 15% and 32% revenue increase and among 20% and 48% rise in net income. This experience demonstrates how technology, combined with a clear governance framework, can turn pricing into a competitive advantage.
Overcoming Resistance: Making Pricing a Strategic Priority
Despite its transformative potential, pricing often faces organizational resistance. To unlock its full power, leadership must:
- Educate and Empower: Equip decision-makers with the knowledge to understand pricing’s strategic impact. “When leaders see pricing as a growth engine, not just an operational necessity, everything changes.”
- Foster Collaboration: Pricing success depends on cross-functional alignment. Teams in commercial, finance, and customer experience must work together to craft strategies that balance profitability with customer-centricity.
- Measure and Celebrate Success: Share tangible results, such as revenue growth and improved retention, to build confidence and demonstrate the impact of pricing as a strategic function.
Pricing: A Blueprint for Financial Growth
“Pricing isn’t just a lever—it’s the lever for competitive advantage.”
For financial institutions, adopting a dynamic and customer-centric pricing approach is no longer optional. It is a critical strategy for thriving in an increasingly competitive and volatile market.
By blending insights into willingness to pay, profitability models, and the power of AI-driven tools, financial services can not only enhance their bottom line but also deliver unparalleled value to their customers. As we look to the future, it’s clear: those who embrace the strategic potential of pricing today will lead the financial sector tomorrow.
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About the Author
Daniela Leon Cornejo is a seasoned pricing and revenue management expert with a proven track record of driving profitability and growth across industries. As Head of Pricing & Analytics at Banco de Crédito del Perú (BCP), the largest bank in Peru, Daniela has led transformative initiatives, delivering significant revenue growth and net income increases.
With experience spanning LATAM Airlines, Casa Andina, and Libertador Hotels, Daniela brings a unique perspective on strategic pricing and business transformation. She holds an Executive MBA from Adolfo Ibáñez University and a second Executive MBA at the Kellogg School of Management.
