Robust Product and Process Designs Required to Enter Emerging Markets

Robust product and process designs at an attractive price position are prerequisites to compete in emerging global markets.

The challenge is to have robust product and process designs for the entire life cycle of the offering at an attractive price position. Often, only sketchy information on individuals' credit risk is available compared to the information available in North America, hence a bank needs to use significant surrogates and qualitative information in both deciding to lend and the rates.

Entering a new market in a developing economy also comes with the complexities of having to deal in multiple local languages, with varied customs and expectations on service quality, with differences in what consumers are willing to pay and how long they are willing to wait for service, and so on. Banks that wish to operate in emerging markets need to accept rather than challenge local consumer behavior or try to force-fit business/product models that may work for them in a different market.

There are significant risks that can be mitigated to a large degree by appropriate technology solutions, such as predictive data analysis tools that highlight any stress behavior building up in a loan product portfolio in a particular geography or age profile, for example. Often, data sliced and diced in multiple ways gives much more valuable and actionable information than aggregated data.

Existing IT systems and architecture can usually be tweaked to manage the risk/reward equation optimally. However, it is often essential to have a modular approach from an IT standpoint.