Are you ready for your new product launch(es)?
Uncertainty is the term AQN has heard the most when talking to bank leaders and lenders during the pandemic. The world has changed a lot for everyone, and commonly held pre-crisis truths in lending may not stand in the coming months and years. To date, defensive moves have been the market move. Provide relief for customers; cut back on marketing and acquisitions; lower current unused exposure. While effective in the short run, these are not sustainable strategies. There is an unprecedented level of uncertainty across all aspects of lending businesses that is causing these defensive moves and leaving large gaps in understanding across product design, credit, modeling, and marketing.
Many things have changed:
Take travel rewards credit cards. Do customers really want travel rewards when their ability to use them is limited? Spend mix has shifted, and cards rewarding travel and dining are providing less value to customers than they did pre-crisis. If this was the ideal rewards structure pre-crisis, what will the new ideal structure be in a COVID and post-COVID world?
Credit models are the backbone of best in class credit programs, allowing lenders to accurately predict performance of customers by leveraging vast amounts of performance data on their own products. A basic assumption of these models is that the world 2 years ago (when customers booked into a product) looks like the world today. Adapting to a situation where the world most definitely isn’t the same and adeptly incorporating new data along with the old is a different skill, and one that many modeling groups don’t have.
Uncertainty will also impact marketing and lenders’ ability to predict response. In line with credit modeling, if a lender cannot predict how a customer will perform then they will also struggle with predicting how many customers will be looking for new credit, and what demand for new credit means in these times.
With no clear end in sight for the COVID pandemic, this uncertainty will continue to persist. If we cannot predict how long this environment will last, banks must learn to quickly adapt and grow within it. “Quickly adapt and grow” – are we talking about a startup? Well, startups and new products actually provide a great lens for the action banks need to take. Treat re-entry in the market, with all your products, as new product launches.
Successful new product launches are driven by a handful of factors, all of which will be critical for banks moving forward. All are designed to deal with the inherent uncertainty of a new product launch:
| Factor | Bank Uncertainty | New Product Approach |
| Product Performance | Lack confidence on product performance, including customer usage and loss rates. | Start small, build in forecasts with sufficient variance to weather learning periods |
| Data Sources | Which data sources will help with predicting performance on my new product? I can’t compare directly to past data. | Test a variety of sources during early stages to determine those with best predictive power. Be open to alternative data sources to add behavioral splitting power. |
| Customer Demand | What product features will customers be looking for in a pandemic/post pandemic world? | Don’t be held back by your original idea. Be receptive to customer feedback, test multiple ideas, invest in winners. |
| Learning Agenda | All of this makes sense, but how do we execute against this plan? | Before launch, determine at least a 1-year product roadmap. This will include key check points to measure the impacts of tests, analyze results, and provide windows to adapt and pivot approaches. |
| Speed to Market | If the product I put into market isn’t perfect, are we making a mistake? | Every day your organization waits to relaunch its products delays your learnings and allows for competition to catch up. Start small to limit mistakes, but the value of real performance data is worth the effort and cost of launching small now. |
Over the past 10 months, AQN has helped a variety of clients with pre-launch services for new products across lending product types:
AQN provided pre-launch support for a large bank launching a new online SMB lending product. AQN’s expertise was leveraged across product design, credit policy, underwriting data sources, product roadmaps, pricing, learning agendas, and collections strategies.
AQN assisted a pre-launch fintech with product strategy, including a re-design of the product terms and val-prop. AQN helped the client develop a learning agenda, focused on making the product more resilient to gaming and credit risk by revisiting the structure of the rewards program and the underwriting policies. AQN’s experience with unit economics modeling and portfolio modeling proved valuable in identifying key risks and opportunities.
AQN assisted a pre-launch card issuer with a unique val-prop with advice covering product strategy, market sizing and entry, and key components of running a credit card business. AQN developed custom unit economics models and leveraged the outputs for feature evaluation, scenario gaming, and credit policy development. AQN’s deep expertise helped to accelerate the client’s journey towards launch.
AQN engaged with a pre-launch point-of-sale lender to support program design and credit policy development. AQN used machine learning techniques to evaluate credit and alternative data sources for use in underwriting, and then built initial credit and fraud policies by leveraging industry expertise and historical data. AQN's deep experience helped the client prepare to enter a new market and represent its interests to not only third-party vendors, but investors and creditors as well.
Our experience in this space will help any lender looking to successfully re-enter the market and create a competitive advantage as others lean on old policies and practices. As seasoned practitioners, combined with recent experience of guiding product launches, data source evaluation, test design, and forming learning agendas, AQN is ready to help your business. Please reach out as you think about your lending product’s next steps or if you’d like to learn more about our framework.