Costing and Pricing of Financial Services: A Toolkit

As financial institutions become more sophisticated and client-oriented, they start to offer a range of products. To achieve financial viability, management's need to understand their overall cost-structures and income flows on a product-by-product (and often on a branch by-branch) basis. A clear understanding of an institution’s cost structures is essential in designing appropriate prices for pilot testing new products. MicroSave’s Allocation-based Costing and Pricing of Financial Services toolkit allows the financial institutions’ management to:

• Determine the full-costs of delivering products;
• Determine the profitability/contribution of the products (including analysis over changes time);
• Refine cost/profit centers and the institution’s management information systems;
• Identify hidden-costs (especially at a departmental level);
• Instill cost-consciousness amongst department managers;
• Price current/future products;
• Make informed decisions about selection of products (including cost/benefit and marginal cost analysis);
• Improve business planning and investment decisions (including which products to market etc).

[Author's Abstract]