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Medium Product Launch Profitability

South bank

#Financial Services
ProHub Comment

This case requires candidates to conduct market sizing analysis, compare two distribution channels (branches vs. online), and synthesize quantitative findings with qualitative country-specific considerations. The key challenge is recognizing that while the low-income segment shows attractive payback metrics, structural barriers (limited POS infrastructure, geographic dispersion, lack of financial literacy) require a more nuanced recommendation that considers geographic segmentation and channel selection.

Estimated Time 15 minutes
Difficulty Medium
Source IESE
50 / 100
South Bank (SB) is the leading retail bank in Peru, an emerging South American country. SB has a dominant performance on high-income and a very good performance in medium-income customers but has not been capable of entering to low-income market. CMO has told us that his team has been evaluating the option to launch a new credit card with cashback benefits, which are perceived as much more valuable in this segment, and the product has already shown some results in competitors. Currently, SB has a credit card with a loyalty program based on airline miles. This program is considered part of a strategic alliance with an important regional airline. The CMO would like you to evaluate if it is convenient to invest in this project.

Clarifying Information

  1. Peru has 35 M inhabitants. The local currency is PEN. Adults represent 70% of population.
  2. Country has 3 main economic segments, with clear different behaviours in credit card use.
  3. Consider Credit Card business as an independent unit of analysis.
  4. Revenues are only generated by merchant fee, a percentage of the amount paid with the card. During the last years has been stable at 2%.
  5. Each client can only have 1 credit card at the same time.
  6. To be approved, a project is required to have a payback period of 3 years. As a secondary metric, CMO prefers to generate the highest possible net cash flow in the first 3 years.