How can I estimate the amount of money needed to be put in an ATM by a bank opening a new branch in a new area?

Omar asked on Oct 11, 2017 - 1 answer
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Ray replied on Oct 12, 2017

Hi Omar,

I think this case tests your ability to understand supply vs demand. Please find below my rationale:

The amount of money needed to be put in an ATM over a given time > the amount of money needed for consumer withdrawal over the same time period. The reason why it's > and not = is because you want to ensure the bank has enough cash over periods of fluctuation in demand (e.g. banking crises)

Therefore, you would need to market size the amount of cash withdrawn in a 'new area' and multiply that by an appropriate percentage to ensure it is greater than the demand in that area (e.g. I would say 10% is good).

Firstly, define what they mean by 'new area'. Secondly, you can start off the market size the amount of cash withdrawn in a 'new area' through your own personal experience - How often do you withdraw money and how much do you take each time? Work from there onwards making assumptions on certain levers (e.g. technologically advanced societies tend to use card/mobile payment more etc.)

Hope this helps!

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