Studying F/X Viability in LatAm Markets

Services

Market Assessment Research

Challenge

Our client, a global 100 financial services firm, looked to Latin America to extend the life of one of its oldest service/product lines, foreign exchange (F/X) services. In Latin America, demand for F/X goes well beyond the traditional tourism market. Many merchants working in imports and exports rely on F/X services to hedge their savings against devaluation, and our client wanted to study the region ahead of plans to invest there.

Approach

Americas Market Intelligence (AMI) studied the viability of three markets. We analyzed demand, what drove it and how profitable it was in each market, how and why customers bought F/X services. We also studied the competitive environment and the relative difficulty of market entry. Perhaps most importantly, we considered the macro-economic, political and regulatory environments in each market.

Result

AMI’s study showed that the largest market would require a large investment to successfully enter but we also predicted a likely devaluation within the next 12 months and recommended that the client wait for this to happen before investing.

In the second market, AMI demonstrated that F/X was a very low margin business and not worthy of investment. In the third market, our research revealed that it was a viable market today but was also too small a market to enter alone without the added volume of a second market. As a result, the client shelved its plans to expand into Latin America. The large country in question devalued its currency by 60% five months later.

Client Benefit

AMI showed the client how their services would fair in Latin America, helping them to realize that their expansion strategy was ill-timed, avoiding great losses.