Don’t let anyone tell you different, price transparency in Banking has come on a long way since my early experiences as a teenager in banking in the 1970’s. I recall being invited to take the printout of business customers into the manager’s office at one
of the first branches I worked at so that he could assess the annual fee to be charged to each customer. It was a rudimentary printout with limited information but as it happened that didn’t matter.
The event went something like this. I’d call out the business customer name and he would say something like, “He’s a good chap - £10”, “Oh, he took me out to lunch a couple of times this year - £10, “He’s been a real pain in the a--e - £50”. You get
Dreadful I’m sure you’ll agree. You see, because he didn’t know anything about the underlying costs of servicing these customers we could have been undercharging them all!
A few years later I was responsible for business customer charges and by this time the industry had evolved beyond the Neanderthal. I was pricing business customer commission charges based upon actual volume throughput (credits, remittances, etc) and the
outputs were available to customers. A big improvement but the pricing points were still ‘finger in the air’ stuff, so we probably had it wrong but, to our credit we were at least consistently wrong.
Nowadays, it is relatively common for Banks to use ABC models and this has taken the evolutionary pricing trail to a new level. Now the Banks can allocate costs to products and services far more scientifically.
In many cases though Financial Services companies still have some way to go to catch up with the manufacturing industry who are really good at costing and pricing. In my view that gap will be closed when the Financial Services companies (that are lagging
behind) do not rely only on accountants without any real knowledge of the business they support determining what overhead gets allocated to what product, but instead have business oversight of the process.
That said the industry does now generally possess an auditable trail between cost and pricing and while end users of products and services may still call for increased transparency we have certainly moved out of the dark ages.