BCG and Q2 Partnership: Driving Impact Through Commercial Loan Pricing

BCG and Q2 Partnership: Driving Impact Through Commercial Loan Pricing

By Q2

2 Nov, 2021

By Tim Shanahan, VP, Client Strategy & Global Partnerships, Q2 PrecisionLender

It’s often said that some of the best ideas come from clients. The new partnership between Q2 and Boston Consulting Group (BCG) proves that point. Launched this month, the formal partnership brings together BCG’s commercial banking strategy and change management expertise with Q2’s best-in-class technologies.

I recently spoke with Sumitra Karthikeyan, Managing Director and Partner of BCG, and she shared her perspective on the genesis and immediate focus of the BCG and Q2 partnership and the new YieldBuilder solution.

“We've crossed paths as companies through the customers we serve and we’ve each heard directly from several clients that what we bring is very complementary,” Sumitra began. “But even if clients hadn't brought this to our attention, I think we would have naturally come to that conclusion, because we bring capabilities that are mutually reinforcing.”

She added that there is a common set of people between the two firms who, in the past, worked directly with one another — and so a relationship of trust existed even before both companies started talking about a potential partnership. Also, both Q2 and BCG have worked through similar types of industry challenges on the banking side.

The partnership between BCG, the preeminent commercial banking consultancy in North America and globally, and Q2 PrecisionLender, the number one intelligent pricing software, represents best in class coming together. The reason that we're broadening this partnership and launching a joint solution is to make it easier for our clients to partner with us and buy one integrated offering.

Leaving money on the table

Initially, the partnership will focus on delivering a joint solution for loan pricing. There are opportunities with banks — especially in commercial banking, where the partners strongly believe that banks will benefit immensely from taking a value-based pricing approach.

“Today, a lot of the pricing is non-standardized discretionary,” Sumitra said. “As a result, we feel that banks are both leaving money on the table and, more importantly, not conveying the value that they bring to their clients effectively since pricing is a very important signal of the value that you bring.”

“And this is the opportunity that we see with banks,” she added. “If you translate it to dollar impact, it's a significant improvement in their revenue base, both on the spread side as well as the fee side. And so, what we jointly take to them is the ability to design a new pricing construct, which allows the bank to price for value.”

It helps the field force — relationship managers and portfolio managers — to understand what pricing best practices look like, providing a platform and a tool for them to use on a continuous basis in a standardized and scalable way. The client sees one entity and joint solution with YieldBuilder, but behind the scenes, it's powered by both BCG and Q2 PrecisionLender.

One plus one is greater than three

There's a reason that when you combine the expertise of both BCG and Q2 PrecisionLender, the result is a combined solution that’s significantly better than either company’s sole offering. Having two things work in concert together naturally improves the level of execution delivered.

Individually, each solution solves a specific set of problems — but combined, this joint solution reinforces its ability to tackle them all.

“When BCG does this work, we do everything from the design to the change management — teaching relationship managers how to price for value,” Sumitra explained. “And it's very hands-on coaching, it's very much driven by the context of the bank and the set of clients that they have. But at the end of the day, we still rely on their internal training teams to continue doing the training over time,” she added.

On the other hand, Q2 PrecisionLender has a platform embedded with the ability to train itself each time a relationship manager uses it. And so it is always on, and constantly learning from different contextual and timely interactions. We’re putting the two together: bringing the power of BCG's experience — having done this change management and figured out how to really think about value-based pricing, or how to have conversations with clients — and pairing it with a platform that makes it timely, contextual and easily accessible to the relationship manager to augment the power and utility of each individual part.

What we offer as partners that we can’t offer individually

Q2 PrecisionLender is a technology platform that facilitates and supports banks in adopting a different pricing strategy, including coaching and counseling. It is the underlying technology that brings a robust platform, integrating well with most banking operating systems and deep external benchmarking.

“On the flip side, BCG enables these programs to stick and run successfully longer-term by enlisting the support of our executive suite early on,” Sumitra said. “Because pricing is fundamental to the organization, you must get buy-in from the top to be able to influence things like metrics, incentive systems and the level of managerial oversight that will go to it — all of which help us achieve higher impact, as well as sustainability for the longer run.”

BCG also takes a slightly different approach to thinking about value-based pricing, taking the bank's own internal data and applying certain algorithms that have been developed and tested over time.

It’s about more than pricing

Among regional banks alone, about $1 trillion in outstanding loans exists. We believe this presents an immense opportunity — and not just for banks to make more money, because that's not the primary motivation. Instead, it is to showcase that they are differentiated in lending.

But the industry is not taking advantage of this massive opportunity, and we are here to deliver on it.

The partnership starts with an unmet demand in the market, an area of disruption where Q2 and BCG feel clients and banks will benefit. The YieldBuilder solution is one of its kind, bringing together best-in-class expertise and technology to solve a very big problem for commercial banks.

Sumitra added, “The one thing that we hear time and again from banks and relationship managers is that lending is a commodity and that the only thing we can compete on is price. And both BCG and Q2 PrecisionLender passionately believe that's not the case. They just need to learn the art of signaling value-based pricing.”

To learn more, register and join the upcoming webinar on January 20th"YieldBuilder - Driving Yield Improvements at Your Commercial Bank".


Written by Q2