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1 minute read
In the current economic environment, it is incredibly hard for financial institutions to generate profits from what used to be their primary activities. Interest rates are lower than ever, and in countries such as Germany and Denmark they are even negative, putting great pressure on banks' interest margins; and on top of this, you have tight post-financial crisis regulation and political turmoil in France, US and UK.
In a time like this, financial institutions need to think outside the box to generate profits from alternative sources. A low-hanging fruit for most financial firms is introducing new services, new fees and improve the pricing of existing ones.
Introducing New Services
Like any other firm, financial institutions should always aim to create new features (typically an add-on service for banks) that add additional value to your customers -- what is important to them and how can you address this with a service? This can be services that you have digitalized, or special services tailored to clients that value customized services -- and most importantly, they should charge a suitable price for these new services.
Introducing New Fees
Banks already offer loads of services to their customers, many of which are free. In times like these, banks should consider charging a fee for some of the free services where it makes sense; some banks are now charging a small fee for current accounts, and generally making customers pay for valuable services that traditionally have been offered free of charge.
Improving Pricing on Exisiting Ones
Banks already charge for some services such as issuing new credit cards, insurance-packages, technology packages, and even add-on services such as airport parking and repair services for when your car breaks down (examples of the value-adding services as suggested above). However, banks tend to price these services suboptimally, and in most cases there is room for great improvement in their pricing.
Read how to set optimal prices for new products here, or learn how to optimize pricing for current products here.
