PrecisionLender recently launched its newest product offering, Market Insights. If you want an in-depth look at what it is and what it does – you can watch our on-demand webinar: Pricing Competitively With Market Insights.
But if you want a CliffsNotes version, take a few minutes to read this Q&A. Much of it is based on a podcast conversation we had with Tim Shanahan, our VP and Head of Client Strategy at PrecisionLender.
Q: What is the problem we saw in banking that Market Insights is built to solve?
A: In the world of commercial banking, transparency for loan pricing doesn’t exist. It’s an absolutely opaque market. It’s very difficult to find out what other banks are charging for a given credit product. And frankly, what banks are able to learn is often completely hearsay. For years, banks have been asking us to help them secure better transparency and better intelligence on credit pricing. That’s Market Insights.
Q: Do bankers ask for data on the other banks in their region?
A: They usually do. And there was a time when geographic proximity was really the primary driver in credit pricing. But those times have absolutely changed. Now there are a ton of other factors that determine pricing. Things such as: the risk profile, the deal size, the loan tenure, the industry that’s involved, the product type. It takes a lot of data to put together the right pricing insights for banks.
Q: Where does this market data come from?
A: It actually comes from the PrecisionLender platform. On an annualized basis we’re structuring approximately $1.9T in commercial loans. Each week we view and assess the profitability of a loan book of actuals that’s approximately $660B. That’s about 15% of the commercial assets in the United States. This enormous data set can then be used to simulate countless variations of market conditions for our customers.
Q: The product descriptions of Market Insights all describe its information as “timely.” What does that mean and why does it matter?
A. Providing market pricing data to banks isn’t a new thing. Companies would essentially ask around to banks to find out how they priced deals and then compile that information and send it to client banks. But that means bankers only get it well after the fact – showing them how their deal stacked up weeks or months after they’d already negotiated it.
Market Insights provides this information when relationship managers are pricing and negotiating the deal. It’s delivered via Andi, PrecisionLender’s digital enterprise coach. This is impactful intelligence, because it guides RMs on what they “can do” rather than what they “should have done.”
Q: In the past we’ve warned against using benchmarks. Isn’t that what Market Insights is doing?
A: Good question, but NO. What you’re referring to is what we’ve often described as a “race to the middle.” The fear: If you give RMs an average rate for a deal, their deals will inevitably cluster around that number.
Market Insights gives RMs guidance based on what is achievable in the market. And it divides that market into quartiles. So, if for example, your original price is at the bottom of the market, Andi would deliver a recommendation like this from Market Insights:
“Increase initial rate by 11 bps to be higher than 25% of similar loans.”
If the RM follows that suggestion, the next Andi recommendation would show how much the rate would need to rise to be higher than 50% of similar loans. And so on, up to the top of the market.
In other words, it’s not about moving RMs to an average – it’s about nudging them toward higher achievable returns.
Interested in seeing Market Insights in action? Click on the banner below to schedule a demo.
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