A long-time client of AQRISK is now expanding AQOPTIMIZER to support advisors in pricing retail and private customers. The bank has leveraged AQOPTIMIZER to assess and price corporate customers for years. They have identified substantial upside in expanding these capabilities into the retail and private business.
Banks can implement AQOPTIMIZER at their own pace and in stages that suit their strategy. A typical rollout follows the sequence: Management/CFO office → Corporates → SME/Retail → Private customers.
We increasingly see AQOPTIMIZER being applied across the entire credit portfolio, including retail and private segments.
It often makes sense to prioritize corporate customers first, due to their higher complexity, tighter margins, and the potential high cost of mispricing even just a few large exposures.
Traditionally, banks have been hesitant to apply individual pricing models to retail/private customers, often due to arguments that lower customer lending volumes, simpler cases, and lower risk do not justify the effort and resources.
Below,we challenge these assumptions and explain why more AQRISK clients are now reaping the benefits from better pricing in the retail/private segment.
Small Individual Volumes & Low Risk
Mispricing a few retail customers will not matter much to the bank - but when largecparts of the retail/private portfolio are mispriced, the financial impact is substantial. Aggregate retail volumes often rival or exceed corporate volumes. Without proper pricing support, many retail/private customers are priced ad-hoc or via simplistic (and often insufficient) spread sheets.
In our experience, when pricing support is lacking, loan and credit rates tend to cluster around a management-set minimum, revealing a massive business potential by launching individualized pricing models onto the retail/private segments – as identified by our client.
Low Complexity?
While retail/private customer business may be simpler, accurate pricing still requires complex input: all income components; funding, capital and overhead costs, capital requirements; expected loss; collateral effects; and return targets etc.
Too Resource-Intensive?
In many banks, pricing remains cumbersome and time-consuming. AQOPTIMIZER changes that - customers can be assessed and priced in seconds and changes to customers can easily be applied in minutes.
This radical improvement in speed saves lots of resources and makes it feasible to apply individual pricing models broadly across the entire credit portfolio.
Integration (api) between AQOPTIMIZER and the bank’s CRM even allows for a hybrid approach: full assessments are triggered only when customers fall short of expected thresholds - optimizing resources without sacrificing precision.
