Pricing is changing. For decades, banks used product-centric pricing models, which worked well to deliver revenue growth and profitability. But today, these age-old strategies are proving ineffective to engage customers who expect greater personalization and value from their financial partners. Emerging technologies and increasing market volatility are forcing banks to relook at their pricing strategies. There are challenges that need to be addressed, as well as opportunities that must be captured for enduring profitable growth.
Adjusting Bank Pricing Amidst Market Volatility
To fine tune their pricing strategies, banks must be fully cognizant of the challenges facing them. The World Bank forecasts global growth to stay at 2.7 percent in FY2025-26. It expects challenges like low growth, trade wars, and persistent inflation to continue to impact the global economy this year.1 The Trump administration’s tariff policy is likely to trigger an economic slowdown in the U.S., with a snowball effect in the rest of the world. And economists have raised the likelihood of a recession to 45 percent.2
Amidst such instability, banks must manage the volatility of their own pricing levers—from lending and deposit rates to fee structures and product pricing. And they must do this without it impacting customer trust or long-term profitability. Getting pricing right calls for a fine balancing act that banks have no choice but to perfect quickly.
Deepening Customer Insights for Strategic Pricing
The only way banks can weather this storm is by deepening their understanding of the customer. Different customers have different price sensitivities, and banks must identify and segment them accordingly to fine tune their pricing offerings. They must be able to access competitive and market intelligence in real time. This includes pricing offered by competition, as well as customer movement patterns like deposit migration. They must model the cost of funds, interest margin pressures, and customer attrition risks across multiple rate scenarios to prepare for any eventuality. And they need to modernize pricing engines, so they can support tiered, usage based, and relationship-based pricing, and respond quickly to market changes with innovative offerings.
Leveraging Dynamic Pricing Models
Banks would also do well to adopt dynamic pricing strategies prevalent in other industries like retail and travel. They can analyze customer data ranging from transaction history to credit scores and products to offer personalized pricing in real time. For example, they can offer personalized, relationship-based, and preferential loan rates to long-standing customers. Or they can adjust fees based on account balance and activity. They can also adjust interest rates and fees in real time in response to market fluctuations and customer behavior. Such initiatives go a long way to secure customer satisfaction and loyalty.
Harnessing the Power of AI
Pricing innovation will depend on an organization’s ability to analyze vast volumes of customer data to arrive at intelligent insights on their behavior and requirements. The emergence of AI, and particularly generative AI, has opened new possibilities for the banking sector. Little wonder then that more than 60 percent of CEOs are considering investing in AI strategies to drive modern pricing strategies.3 Many organizations are also leveraging the natural language processing capabilities of AI to improve productivity and transform customer service functions. Autonomous AI agents are the next phase of AI evolution. It can completely transform deal management, pricing personalization and management, advisory services, and customer service. Here, the AI agents can function independently without any prompts of human intervention. For example, in an interaction with a customer on balance enquiry, the AI agent can analyze their relationship with the bank and spending patterns to proactively offer budgeting or investment advice, ensuring a value-driven engagement.
Modernizing Legacy Cores with Robust Middleware Platforms
Pricing modernization is now a top priority for most banks. But can legacy core platforms drive the agile, responsive pricing strategy that they want to implement today? The answer, unfortunately, is no. Pricing is deeply embedded within the legacy product core systems which are siloed, complex, and not flexible or scalable. Transforming these old systems can be risky as they still power fundamental business processes. Instead, banks must now consider deploying powerful cloud-native, microservices-based middleware platforms that can sit over their legacy cores to separate pricing from the system of records and drive innovative strategies. With a middleware platform in place, banks can deploy dynamic pricing models, understand customer sensitivity to rate fluctuations, and roll out customized or tiered offerings. They can also easily leverage AI and emerging AI progressions for better analytics, automation, and productivity.
Balancing Innovation with Transparency and Fairness
But technology is only one facet of the pricing transformation. Banks’ efforts to cash in on new opportunities must not come at the cost of transparency and fairness. They must ensure that they clearly communicate the rationale behind pricing structures. A detailed explanation of a newly introduced fee can help customers understand why it was necessary and build their perception of fairness. They must uniformly apply fees and charges across similar customer segments to ensure there are no perceptions of bias. And they must engage with customers to get their feedback on pricing to understand how they perceive value. This will also help them fine tune their offerings to meet customer expectations. With the increased use of AI, banks must ensure not just data security and privacy but also strong data governance. Regulations on the ethical use of AI are still evolving, and banks must ensure strict compliance with each one of them.
Pricing is evolving from a back-office function to a front-line competitive differentiator and technological innovation and customer-centric strategies will form the foundation of modern pricing strategies. By aligning pricing strategies with customer value and ethical standards, banks can build resilient, future-ready models that drive both loyalty and long-term growth.
