IMproving Loan Portfolio Management: An Introduction to Pricing Optimization

The classic response of many banks in the face of an unprecedented situation is to adjust their underwriting policies. However, banks should also be using their loan pricing to attract profitable customers, deter less profitable customers, and manage their overall portfolio risk. Unfortunately, current pricing practices at banks suffer from a number of shortcomings and it can be difficult to effectively manage pricing. To illustrate, the lending

portfolios at several different banks in North America and the UK, only about 20% of loans are properly priced. About 40% percent of rates are too high, and 40% are too low, largely because the effect of price on consumer response is poorly understood (Nomis Solutions pricing research).

Dr. Phillips founded Nomis Solutions in 2002 to help financial services firms use pricing analytics, optimization and execution to improve profits and market share by better understanding of how customer preferences impact product and portfolio performance. Dr. Phillips is responsible for ensuring that Nomis Solutions' analytics continue to be best-in-class and generate the highest level of value to customers. He is also responsible for leading Nomis Solutions’ cutting-edge research and development efforts.

Dr. Phillips is a lecturer at Stanford University Business School and served as a visiting professor at the Columbia University Graduate School of Business. He authored the award-winning book, “Pricing and Revenue Optimization.”

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