If principled negotiations and benchmarking take hold, aren’t the banks going to be big losers?
At first glance, banks appear to have much to lose. Where they have leveraged their advantaged position into premium pricing, savings that result from benchmarking will accrue to their customers. Given the multiplier effect that pricing has on bank returns, this is problematic. No bank wants to see the profit erosion. At the same time, no bank wants to shore up results by disadvantaging its customers. Margin shortfalls may be a transition cost associated with the growth of benchmarking. Problematic or not, pricing adjustments are a short term issue. Long term, benchmarking will make the banks winners too. Benchmarking data will enable them to publicly justify their pricing policies – an important consideration in a regulated industry that’s concentrated and reporting record profits. The last thing they need or want is the corporate equivalent of Ing Direct’s “Save Your Money” campaign or Capital One’s “Hands in Your Pocket” ads. It will also remove much of the suspicion and grumbling t
