James lays out a methodology for automated pricing for Banks based on a set of characteristics that are individually specific to each customer. The premise is that banks lack of price competition is an outcome of the lack of appropriate customer information.
Banks’ disinclination to compete on price is generally tied directly to the paucity of analytics and rigor in their pricing computations
Source: Enterprise Decision Management – a Weblog: Automating and improving pricing in banking
I agree with the statement, but would argue the the connection is not direct. There is another element at play and that is commoditisation. I commented on the post with:
“If all bank products look as identical as copies of the same book, then the only differentiation is indeed price”
I plagiarized this quote from Aneace’s Blog, because its perfect description of commoditisation. While I absolutely agree with the characteristics of the decisioning mentioned above, I worry that this approach would need to be combined with creative development of innovative banking packages, that look different than the competition.
Without differentiation, and the value that brings, the price of commoditised products and services will be market driven only.
As much as pricing needs to be personalised, Bank services need to be personalised too.
Relevance to Bankwatch:
Its really hard to differentiate on a product by product basis. A mortgage will always be a mortgage. I believe differentiation must come from the organisation itself and the value it provides to the customer. That value must be more and broader than a better rate.
Bankwatch 
Actually, I think mortgages are one of the few products where price is more important than service. People, whether they know it or not, make cost/benefit decisions in their minds when they’re dealing with banks, and in most cases they’re unwilling to switch banks because of a better interest rate on chequing accounts. To a moderate degree they’ll switch because of premium rate savings accounts, but that’s more of an emotional anti-bank response that ING (and others) are good at evoking. But for mortgages, most customers seem willing to put up with abhorrent service if it means keeping their rate a few basis points lower.
As much as it would make our lives as bankers easier, there’s no blanket approach that would work. Some people are price shoppers, others look for premium service. That’s just the way it is. To make it more complicated, the scale between those two extremes changes depending on the product, the value of the product, the economy, etc., etc. We can build all the systems we want to help us make a decision, but in the end it still has to be a judgment call.
I tend to agree. We can talk about differentiation, and value add, but the reality probably is that customers primarily think of buying a home, and secondarily of getting a mortgage.