In today’s financial landscape, technology is the bank. From mobile apps to real-time fraud detection, IT drives every customer experience and operational decision. Yet, when it comes to product costing or client profitability models, many banks still rely on legacy approaches that treat technology as an opaque overhead line item.
That’s a problem.
If your cost model can’t accurately reflect how technology services are consumed, you risk distorted pricing, poor investment decisions, and ultimately, weaker competitiveness. This is where IT Financial Management (ITFM) and Technology Business Management (TBM) principles make all the difference.
Why ITFM/TBM Matters for Banks
Unlike traditional allocation methods, ITFM provides a structured, transparent way to link IT costs to business outcomes. For banks, this is critical because:
- Digital drives margin – Products like mobile banking, payments, or wealth management are technology-heavy. Without proper cost attribution, you can’t measure true profitability.
- Regulatory scrutiny is rising – Regulators want clarity on technology spend and operational resilience. A vague IT cost structure won’t cut it.
- Cost-to-serve is customer-specific – Different clients consume technology differently. High-net-worth clients, for example, may rely on advanced analytics or relationship tools. Your model should reflect that.
What Does a “Solid” ITFM-Based Cost Model Look Like?
A robust cost model for banking products or client profitability should:
✅ Map IT costs to services – Start with a service catalog. Know what infrastructure, applications, and capabilities support each product.
✅ Include consumption-based allocation – Don’t spread IT costs like butter across all products. Use metrics like API calls, storage usage, or transaction volumes.
✅ Incorporate TBM taxonomy – Align cost categories (e.g., Run vs. Change, Infrastructure vs. Applications) so leadership sees where money goes and why.
✅ Connect to business KPIs – Tie IT spend to revenue-driving activities: how much does it cost to process a trade, run a mobile app feature, or onboard a corporate client?
The Strategic Payoff
Banks that embed ITFM/TBM principles into their costing models gain:
✔ Pricing accuracy – Set fees or margins based on true cost-to-serve, not averages. ✔ Smarter investment decisions – Know where to optimize spend without cutting value. ✔ Business-IT partnership – Speak the same language: cost transparency builds trust.
In a world where every financial product is a digital product, understanding IT costs isn’t optional—it’s a competitive advantage.
So, the next time you review your product profitability or client pricing model, ask: Does this reflect the real cost of technology? Or is it still a black box?
The difference could be the edge your bank needs.
