Q2 Holdings, a provider of digital transformation solutions for banking and lending, and Boston Consulting Group (BCG) today announced the launch of YieldBuilder, a solution that addresses effective loan pricing for commercial banks.
The companies cite research from S&P Global Market Intelligence which indicates net interest margins have recently dropped nearly 14 per cent for most lending institutions, and per the Federal Deposit Insurance Corporation (FDIC), which in the second quarter of 2021 saw net interest margins declined 31 basis points from a year ago to 2.5 per cent, their lowest level on record. The largest financial institutions in the US drove the aggregate decline in net interest income.
“Effective commercial loan pricing is a major industry problem and it’s one that we’ve worked to mitigate over the years with Q2’s PrecisionLender solution,” said Tim Shanahan, vice president of Client Strategy and Partnerships, Q2 PrecisionLender. “We are excited to team up with BCG to deliver YieldBuilder, a new comprehensive solution that will help commercial bankers better address the loan pricing issue and deliver better services for their clients. This partnership represents the best of both worlds—best-in-class digital banking technology and the industry’s leading expertise—to help commercial banks address their most difficult challenge.”
YieldBuilder allows commercial banks to deploy value-based pricing, via a platform that helps relationship managers price effectively. The companies said the solution can be used for all commercial loan products across segments and has several unique propositions, beginning with improving returns without impacting the win rate.
Using artificial intelligence and machine learning, YieldBuilder analyzes bank proprietary data to estimate the lifetime value of a client. Other promised benefits are good market benchmarks on loan spreads and easy integration with commercial bank technology systems.
“While record levels of deposits have focused banks’ attention on driving loan volume, we strongly believe that it does not have to be at the cost of lower margin spreads,” said Sumitra Karthikeyan, a partner and managing director at BCG who leads the firm’s North American Marketing, Sales, & Pricing practice for financial institutions. “In our work to help banks develop new pricing strategies in commercial lending, enduring results are achieved when those strategies are built on top of a robust platform like the Q2 PrecisionLender solution. We are delighted to bring YieldBuilder to the market with them.”
While currently only available in North America, the companies have plans to introduce YieldBuilder around the world, they said.