Blue Ocean Strategy
for Other credit granting (ISIC 6492)
The 'Other credit granting' industry is ripe for Blue Ocean Strategy due to intense price competition (MD03), market saturation (MD08), and the pressure to innovate against digital entrants (MD01). There are significant populations of 'non-customers' (e.g., thin-file, gig economy workers, niche...
Strategic Overview
The 'Other credit granting' industry (ISIC 6492) is often characterized by intense competition (MD07), commoditization of products, and eroding profit margins (MD03). Many players are stuck in a 'red ocean' of head-to-head competition, primarily differentiating on price or marginal improvements. Blue Ocean Strategy offers a powerful alternative by focusing on creating entirely new market space, where competition is irrelevant. This involves identifying and serving 'non-customers' – individuals or businesses currently underserved or excluded by the market – and redefining the value proposition of credit itself.
For credit grantors, this strategy is particularly relevant given challenges like market saturation (MD08), the need to identify untapped growth niches, and maintaining competitiveness against digitally innovative entrants (MD01). Instead of competing for existing demand, a blue ocean approach encourages credit grantors to look beyond traditional credit scoring models (DT01), conventional distribution channels (MD06), and existing product definitions. It pushes for value innovation – simultaneously pursuing differentiation and low cost to create a leap in value for both customers and the company.
By systematically eliminating and reducing elements that are common in the industry while raising and creating new value, credit grantors can develop offerings that serve new customer segments or entirely new needs. This could mean embedding credit into non-financial services, developing alternative lending models, or providing holistic financial wellness solutions. This not only opens up new revenue streams and higher profit margins (MD07) but also positions the credit grantor as an innovator, setting new industry standards and potentially reducing regulatory scrutiny by serving previously ignored populations (CS07).
5 strategic insights for this industry
Vast Unserved 'Non-Customer' Segments
Traditional credit models often exclude large segments of the population and small businesses due to lack of traditional credit history, unstable income streams (e.g., gig economy workers), or niche industry classifications. These 'non-customers' represent a vast blue ocean (MD08) waiting for innovative credit solutions that leverage alternative data (DT01) and flexible repayment structures.
Credit-as-a-Service (CaaS) as a New Value Curve
Instead of standalone loans, the industry can create blue oceans by embedding credit directly into other value chains. For example, offering 'Buy Now Pay Later' (BNPL) options seamlessly at e-commerce checkouts or integrating equipment financing directly into a vendor's sales process transforms credit into a utility, creating new distribution channels (MD06) and customer experiences.
Redefining Risk Assessment Beyond Traditional Metrics
The reliance on FICO scores and collateral often limits credit access. A blue ocean approach forgoes this by developing new risk assessment frameworks utilizing behavioral data, cash flow analytics, utility payments, or even social network data (DT01). This allows for responsible lending to previously 'high-risk' but creditworthy individuals/entities, creating a new market for inclusive finance.
Value Innovation Through Elimination & Creation
Many elements of traditional credit granting are sources of friction (e.g., lengthy application forms, slow approvals, hidden fees). A blue ocean strategy eliminates these pain points (e.g., instant approval, transparent pricing) and creates new value propositions such as integrated financial literacy tools, personalized repayment plans, or credit-building mechanisms, moving beyond price competition (MD03).
Ecosystem Collaboration for Holistic Financial Wellness
Instead of merely granting credit, 'Other credit granting' can partner with fintechs, education providers, or community organizations to offer holistic financial wellness platforms. This positions credit not as a standalone product but as part of a broader solution, attracting customers seeking comprehensive financial support rather than just a loan (MD05, CS07).
Prioritized actions for this industry
Conduct 'Non-Customer' Research and Develop Empathy Maps
Systematically research and understand the reasons why non-customers (e.g., gig workers, specific underserved SMEs) are not currently served by the credit market. Develop empathy maps to identify their pain points, unmet needs, and desired outcomes, which can inform entirely new product development, addressing MD08.
Pioneer Embedded Finance Solutions with Non-Traditional Partners
Collaborate with e-commerce platforms, software-as-a-service (SaaS) providers, or industry-specific marketplaces to embed credit offerings directly into their user journeys. This creates new distribution channels (MD06), reaches new customer segments, and establishes a 'credit-as-a-service' model that bypasses traditional competition, addressing MD05.
Develop Alternative Data-Driven Credit Scoring Models
Invest in capabilities to analyze non-traditional data sources (e.g., utility payments, rental history, open banking data, cash flow analytics for SMEs) to assess creditworthiness. This enables responsible lending to underserved segments (MD08) and mitigates information asymmetry (DT01), opening entirely new markets without traditional competition.
Apply the 'Eliminate-Reduce-Raise-Create' (ERRC) Grid to Core Offerings
Systematically analyze existing credit products to identify elements to: (1) eliminate (e.g., lengthy paperwork), (2) reduce (e.g., approval time), (3) raise (e.g., transparency, speed), and (4) create (e.g., financial literacy tools, personalized advice). This shifts focus from incremental improvements to value innovation, directly addressing MD03 and MD01.
Launch an Internal Innovation Lab with Dedicated 'Blue Ocean' Mandate
Create a cross-functional team with a clear mandate and autonomy to explore, prototype, and test truly innovative credit solutions for non-customers. This ring-fences innovation from daily operational pressures and fosters a culture of experimentation, addressing IN03 and IN05 while allowing for higher investment risk in untested innovations.
From quick wins to long-term transformation
- Identify one specific 'non-customer' segment (e.g., freelancers) and conduct qualitative interviews to understand their credit pain points.
- Pilot a simplified, digital-first micro-loan product for a small, clearly defined underserved niche.
- Partner with a single e-commerce platform for a basic 'Buy Now, Pay Later' (BNPL) pilot integration.
- Develop a new, alternative credit scoring model for one specific blue ocean segment, leveraging new data sources.
- Establish an internal 'Blue Ocean' task force or innovation unit to systematically apply the ERRC framework to core products.
- Secure seed funding or a dedicated budget for a blue ocean project, demonstrating commitment (IN03).
- Transform into an 'embedded finance' provider, offering CaaS across multiple industries and platforms.
- Achieve regulatory clarity and acceptance for new, alternative lending models, potentially influencing policy (IN03).
- Cultivate a company-wide culture of value innovation, with blue ocean thinking integrated into strategic planning (IN05).
- Lack of executive sponsorship and organizational courage to pursue new, unproven markets.
- Underestimating regulatory hurdles and compliance costs associated with novel lending models (IN03).
- Failing to adequately research and understand the needs of 'non-customers,' leading to misaligned products.
- Internal resistance from existing departments whose 'red ocean' business models might be threatened.
- Insufficient funding or 'patient capital' for long-term R&D and market development (IN04).
Measuring strategic progress
| Metric | Description | Target Benchmark |
|---|---|---|
| New Market Share Captured | Percentage of customers or revenue gained from previously unserved or non-existent market segments. | 1-3% in year 1, growing to 5-10% in year 3 |
| Revenue from New Products/Services | Total revenue generated from offerings specifically developed under the Blue Ocean Strategy. | 10-15% of total revenue within 3-5 years |
| Profit Margins on Blue Ocean Offerings | Gross or net profit margins achieved on new products, expected to be higher than red ocean competitors. | 15-20% above industry average for traditional products |
| Customer Acquisition Cost (CAC) for New Segments | Cost to acquire a customer in a newly created market space. | Lower than CAC for existing, competitive markets (e.g., 20% lower) |
| Number of Strategic Partnerships Formed | Quantity of collaborations with non-traditional entities for embedded finance or ecosystem solutions. | 3-5 partnerships annually |
| Customer Lifetime Value (CLTV) for New Customers | Projected long-term value generated by customers acquired through blue ocean initiatives. | Higher than CLTV from traditional customer segments |
Other strategy analyses for Other credit granting
Also see: Blue Ocean Strategy Framework