Defy commoditization – Mortgage banking example

Defy commoditization – Mortgage banking example

By Rajesh Setty on Fri 27 May 2005, 9:29 AM – Leave Comment

I saw this interesting story

about a bank in San Ramon coming up with an innovative mortgage banking

product offering. Mortgage banking is mostly commodity stuff and most

commodity offerings compete solely on price

CMG Financial Services, the company that came up with this innovative

product bucked the trend. The idea as I understand it is that with this

offering mortgage loan is tied to a checking account. When your payroll

check and any other checks are deposited to this account, they are

directly applied as credit towards the principal of the loan. As you

write checks, the loan amount increases and an interest is charged to

this loan amount. The final interest at the end of the month is added

to the principal owed. Interesting and different concept from the

traditional way mortage products operate.

They charge a steep premium for this (about a percentage point higher)

My point is not to make a case for this product but to point out that

whatever be the product, you defy commoditization and you get two


a) you make news

b) you can charge a premium

Something to think about in our own professions. What could we do to de-commoditize ourselves?


Related Articles:

Posted in the Business Models, Innovation, Main Page category.

SocialTwist Tell-a-Friend   

Leave a Comment