Strategic Originations: Capitalizing on New Market Opportunities
By Roger Ahern
August 13, 2005

Summary: This article discusses the advantages of lending decision systems that allow lenders to strategically prepare to roll out new products, services and solutions across market segments.

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While the majority of lenders simply wait for Federal Reserve Chairman Alan Greenspan’s comments on interest rates, a strategic minority of financial institutions are leveraging new technology that has prepared them to be ready to implement new credit and origination policies that will result in an increase of loan applications regardless of rate direction.  This article reviews how leading financial service organizations are preparing to make their organizations ready for changes in external market factors such as interest rate or competitive threats. It discusses the advantages of lending decision systems that allow lenders to strategically prepare to roll out new products, services and solutions and seize opportunities across market segments. It also give some general tips of how to prepare your organization to be ready for market changes and capitalize on new market opportunities.

Reacting to Environmental Market Factors and Competitive Market Moves

The ability to rapidly respond to external market factors (i.e. economic policy changes) can result in huge upside opportunities for those who are first to respond.  In addition, companies that intelligently respond and react offensively to competitive threats can keep from losing market share.

Take a hypothetical scenario from the world of auto financing. What if a car buyer had decided on purchasing a Ford SUV but then Chevrolet offered lower percent financing terms on a competitive SUV.  Is Ford ready to match that offer to the buyer or should it decide to pass on the lending decision because it does not conform to its model lending portfolio?  Is Ford ready to quickly make an offer to a prospective customer or will the offer take longer than the customer is willing to wait? With the increasing number of pre-ordered and custom-configured vehicles purchased directly via the internet, systems need to be ready to move swiftly to combat competitive market forces and threats.  However, prior to reacting to market factors, companies that have a decision framework and strategy modeled have an advantage when rolling out new lending policies.  This not only applies to cars, but other pricing decisions that involve risk such as student loans, home loans and personal lines of credits. Companies that have products that can be tailored to consumers needs and quickly changed to meet market movements are best prepared to capitalize on market opportunities

Technology Must Enable Strategic Lending Decisions

With the number of financing options and products bombarding consumers, lenders must look for new opportunities and markets to grow and maintain their lending portfolios.  The number of new accounts booked was long heralded as the most important criteria for measuring the success of lending organizations. However as competition becomes more fierce, lenders must scrutinize their portfolio acquisitions for other key elements to understand the entire lifetime value of each customer.  It will be more essential than ever for lenders to identify, understand and qualify their customers at the time of origination as new markets and segments are pursued.  The market strategist that develops successful originations solutions that allow for planning, modeling and execution of  decision strategies will be rewarded with new market opportunities, more predictable revenue streams and better customer management.