pass on significant cost savings to their customers

[VicNicSor]

This is the example from that thread:
http://forum.wordreference.com/showthread.php?t=2713453

I think I understood that Cobuild's example but this one seems to be a different to me (and I don't understand it), that's why I started a new thread.

pass something on/along to somebody
if a company passes higher or lower costs on to its customers, it raises or reduces prices :
The lack of branches means financial companies are able to pass on significant cost savings to their customers.

CALD

Are "significant cost savings" "higher" or "lower" costs? That is, does a company raise or reduce price in this case? Does the lack of branches let a company to save costs or vise versa? I'm afraid I can misunderstand the whole sentence.
Thank you.

 

[owlman5]

I understand "significant cost savings" to mean "lower costs/prices", Vik. I suppose the company saves money by not having a lot of branches. Presumably, the company can offer a product at lower prices than it could if it had to spend money on operating many different branches.

 

[ewie]

The lack of branches means financial companies are able to pass on significant cost savings to their customers.

Because these financial companies have no (or little) 'physical existence', e.g. they may exist only as websites which are run by one or two employees rather than 100 high-street branches staffed by 347 employees, they save money on wages. The money they save on wages they can pass on to the customer, i.e. they can charge the customer lower fees for their services.

(That's the theory, anyway. In my experience it rarely actually works like that)

Cross-posted with Mr O

 

[VicNicSor]

Oh, I see.
(I thought that having added branches or 'physical existence' could somewhat be a reason for profits.)

Thanks for the answers.