A branch visit and a mobile tap are not the same cost. Your rate says they are.
In banking the product is information, and the cost of moving it depends entirely on how the customer transacts. A blended cost rate per account erases that. Load the channel, the transaction type, the calls and the exceptions, and the unit cost to serve spreads 5 to 10 times around the average, with the extremes more than a hundredfold apart.
Cost and Profitability Consulting · 150+ models since 2010 · TDABC
Cost to serve in banking varies 5 to 10 times around the average, because cost is driven by channel, transaction type, calls and exceptions, not by the account itself. A branch teller visit can consume around 12 minutes of staff time while a mobile transaction is a fraction of a minute. In one illustrative accounts-receivable pattern, two divisions with identical revenue had a more than hundredfold difference in cost to collect. TDABC loads each channel and transaction against a capacity cost rate, so the cost lands on the customer that caused it instead of on a blended average.
Same product, four very different costs.
A customer who walks into a branch consumes staff time measured in double-digit minutes. The same request through an ATM, a call centre or a mobile app consumes a fraction of that, or almost nothing. The product is identical; the cost to deliver it is not. A blended rate per account averages all of this away and charges the digital customer for the branch customer's expensive habits, the textbook cross-subsidy a per-channel model exists to remove.
ONE TRANSACTION, FOUR CHANNELS, FOUR COSTS
Illustrative. The same service request, priced by the staff-minutes each channel actually consumes. The branch and the phone are not the same business.
Cost follows cause, transaction by transaction.
The customer's cost is built from the minutes their behaviour consumes: electronic transactions are cheap, manual ones expensive, and calls, disputes and statements each carry their own time. Multiply by the capacity cost rate of the servicing group and the cost lands on the customer, not the average.
Customer cost = 0.5 min per electronic transaction + 9 min per manual transaction + 4 min per inbound call + 15 min per dispute or exception + 2 min per statement x capacity cost rate of the servicing group
Illustrative. A single manual transaction costs roughly eighteen electronic ones; the dispute term is where high-touch accounts pull away.
SAME REVENUE, A HUNDREDFOLD DIFFERENCE IN COST
Illustrative sector pattern. Identical sales, one division electronic and one manual, and a cost to collect that diverged more than a hundredfold. The blended rate could see none of it.
From a blended rate to a served-cost decision.
Cost each channel
Load the staff-minutes per branch, call, ATM and digital contact against the real capacity cost rate.
Roll up to the customer
Sum the transactions and exceptions of each relationship. The 5 to 10 times spread becomes visible.
Find the subsidy
See which digital customers are funding which branch-heavy, dispute-prone ones, and by how much.
Reprice or redirect
Adjust fees, or steer behaviour toward cheaper channels, so price meets the real cost to serve.
Frequently asked questions
- What is cost to serve in banking?
- The true cost of serving a customer once channel, transaction type, calls and exceptions are loaded against a capacity cost rate, not a blended rate per account. A branch teller visit can consume around 12 minutes of staff time while a mobile transaction is a fraction of a minute, so unit cost varies 5 to 10 times around the average depending on how a customer actually transacts.
- How much does channel change cost to serve?
- Enormously. As an illustrative pattern, a branch teller visit is around 12 minutes of staff time, a call-centre contact around 6, an ATM withdrawal a fraction of a minute and a mobile or online transaction almost nothing. A customer who banks at the branch can cost orders of magnitude more than one who banks on a phone for the same product.
- Why does a blended cost rate fail in banking?
- Because it charges every customer the average, when the real spread is 5 to 10 times. In one accounts-receivable pattern two divisions with identical revenue had a more than hundredfold difference in cost to collect. A blended rate makes the branch-heavy, manual, dispute-prone customer look identical to the digital one, so pricing and segmentation are built on a number that is wrong for almost everyone.
Find the channel cost your blended rate is hiding.
The Profit Check takes five minutes and no data upload. It points to where your cost to serve and your pricing are most likely out of line by channel and segment, and what closing the gap is worth.