Tuesday, December 06, 2005

Case: Bank's modernization strategy

Interviewer: Umang
Interviewee: Yash
Nature of case: 90% quali - 10% quant ( :) once again...quali case)

Problem Statement: A bank wants to close down its eight branches and move all operations online. Should it do so? How would it go about making the decision?

I am not going to reproduce the interview here, but I will mention my key takeaways.

This time I tried to put some structure to my thoughts... :)

Started off by listing the implications the move could have:
1. Impact on Profit
1.1 Due to loss of revenue due to loss of customers
1.2 Due to increase in revenue due to gain of customers
1.3 Due to increase in costs on account of taking all transactions online
1.4 Due to cost savings from closing old operations
2. Impact on Goodwill due to loss of customers (if any)
3. Is this move aligned with the over all strategy and image of the bank?
4. What other benefits could this move entail (I didnt think of this point but I think this should be considered)?

With this thought clear in my mind, i went about asking relevant questions.
Firstly, i wanted to understand the customer profile across branches and whether or not they would migrate willingly onto the new platform. I was informed that the young : old customer ratio is 1:1 which was consistent across the branches. Then i surmised that the old customers must be high net worth customers and hence more profitable for our branch. They might also be ones not very eager to move online. Some of the younger customers might be relatives (sons - daughters) of these old customers. If the family wants to bank with one bank, then some of the young customers might also move along with the old customers if the aged customers decide to move their account elsewhere.

All these points were validated by Umang to be true.

With all this in mind, i recommended that firstly we should do some customer survey to get some feedback about the viability of this plan. Then we should pilot this program in some branches to evaluate the response.

Next, I asked a lot of quant questions about the per transaction cost, profit, expected customer base, expected loss of customers etc ... but this being a quali case, I couldnt get much out of Umang and spent a lot of time just groping in the dark without much data :)

In the process I missed out on asking questions regarding the new services that would be offered, which was pointed out by Umang. Again, this led to some qualitative discussion with no quant stuff available.

Finally, Umang asked me to express the decision in a single equation.

Take Aways: 1. I didnt explicitly link recommendation to reasoning.
2. Final conclusion was not very assertive. I should have said, "because of points a, b, c, d, and e, I recommend xyz." I didnt do it. The interview closed with a casual feel... not good enough.
3. It helped a lot to ask for two mins time to organize my thoughts right at the beginning of the interview after understanding the problem clearly.



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