Case 10: South Africa Bank

Revenue McKinsey Struct. Comm Quant.

Financial Service Round II 4 5 3
Prompt

The client was a market leader of retail banks in South Africa. Despite that they have recently
lowered the cost to the lowest in the industry, the client is still not profitable in recent years.
The client has come to us to find ways of increasing revenue.

•  Goal: profitable in 2 years (give the following information until the candidate ask, i.e.
increase revenue by 20%)
•  Retail bank provides: checking account, saving account and loans
Additional Info

•  Customer segmentation: college students, middle class and affluent people

•  Retail bank service channel includes: Branches, ATMs, Internet, Mobile banking, Call
center, Email and Mail
•  34% of South Africa customer have changed their main bank and 10% plan to change in
the next three years*
•  Our client’s current attrition rate is 50%
•  Exhibit 1: Overview of student segment
•  Exhibit 2: Attrition survey: do you plan to switch your main bank?
* Source: Ernst & Young – Global Consumer Banking Survey 2011

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Case 10: South Africa Bank
Q1: What factors would you consider to increase revenue?

•  A good candidate should ask clarifying questions such as what is retail banking, what
does client do and what specific goal do they have in mind.

Segment, size, growth

Market Customers
Structure

External
Government regulation Competitors

Factors
Current
Product
Internal New
Service

•  We don’t mention cost because cost has been lowered as mentioned in the prompt.

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Case 10: South Africa Bank
Q2: What can you conclude from Exhibit 1?
•  A: 5M × (1+10%)2 = 6.05M
•  B: 10% × (1+100%)2 = 40%
•  Year 1: 5M × 10% × 50% × 10% = 25k
•  Year 3: 6.05M × 40% × 75% × 20% = 363k
•  A good candidate should
•  Drive insights: it is challenging because 1) the market is shrinking, 2) we are facing
the same, if not more serious, competition in the future
•  Next step: 1) dig deeper to find areas in which we can increase market share by
Analyze

out-competing or acquiring our competitors, 2) switch to other revenue streams

Q3: What is major risk and how to minimize it?

•  The major risk is whether the student can pay back the loan.
•  To minimize the risk, we can score each applicant based on:
•  Past credit history (student, family members)
•  Potential pay back ability
•  General economy
•  College type, major
•  Past employment
•  Current saving accounts
•  Terms of contract (loan amount, cosigning, valuable property to put up as collateral)

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Case 10: South Africa Bank
Q4: How to increase revenue in checking and saving accounts?
•  Maintain the old customers and attract the emerging customers: need to understand their
functional and emotional needs and match our product and service to their needs
•  The candidate can briefly mention the key areas to investigate by using data from
customer survey or research reports.
Q5: What can you conclude from Exhibit 2?
•  The interviewer should ask this question only after the candidate has mentioned customer
loyalty, attrition rate, or similar ideas. (Attrition rate means the change of main back, the
Analyze

higher the attrition rate is, the less loyalty the customers are.)
•  Our client’s attrition rate is much higher than world average and South Africa average. A
good candidate should take the initiative to ask “so what”, i.e. why is our attrition rate so
high and what shall we do? Aspects to be improved could be
•  Product
•  Product mix/variety
•  Price
•  Quality
•  Brand image: trust
•  Service
•  Channel accessibility (mobile banking)
•  Security (online purchase warning)
•  Personalized context (email alert of new product)

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Case 10: South Africa Bank

To increase our revenue, I recommend that our client decrease our higher-than-average
Summary

attrition rate by increasing product variety, building trustable brand image, make our channel
more available and convenient for our customers. Also, we found that if we want to increase
revenue by 20%, we need to double our current market share which is challenging. In the
following weeks, I will look into how to increase our share in college loan and create
implementation plan to increase our customer loyalty.

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Case 10: South Africa Bank
Exhibit 1: Overview of student segment

Current year, Year 1 Year 3 Projected growth rate

Current youth population 5M A 10%

% of students 10% B 100%

% with bank account 50% 75% --

Market share 10% 20% --

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Case 10: South Africa Bank
Exhibit 2: Attrition survey: do you plan to switch your main bank?

Our client’s current attrition rate is 50%

Source: Ernst & Young – Global Consumer Banking Survey 2011

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