By: Amanda Roth
The reality of risk-based pricing is that there is not one “end all be all” way of determining what pricing should be applied to your applicants. The truth is that statistics will only get you so far. It may get you 80 percent of the final answer, but to whom is 80 percent acceptable? The other 20 percent must also be addressed.
I am specifically referring to those factors that are outside of your control. For example, does your competition’s pricing impact your ability to price loans? Have you thought about how loyal customer discounts or incentives may contribute to the success or demise of your program? Do you have a sensitive population that may have a significant reaction to any risk-base pricing changes? These questions must be addressed for sound pricing and risk management.
Over the next few weeks, we will look at each of these questions in more detail along with tips on how to apply them in your organization. As the new year is often a time of reflection and change, I would encourage you to let me know what experiences you may be having in your own programs. I would love to include your thoughts and ideas in this blog.