How to estimate the number of daily bank transfers in a day

estimation guess-estimates Market sizing
New answer on Jun 24, 2022
5 Answers
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Anonymous A asked on Jun 23, 2022

Hi! 

Can I receive some feedback on this approach?

1. Calculate the number of users in that digital bank

2. Calculate the number of daily active users from the total pool of users

3. Assume the types of bank transfers/transactions they can do 

4. Assume there's a limit on the amount of transfer they make

5. Assume how much transactions users do within a day

(edited)

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Ian
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replied on Jun 23, 2022
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Hi there,

You'll learn a lot more from this by trying it out yourself first! Why don't you post your approach here and we can provide commentary?

How to approach market sizing

It's very simple: Do the approach the is the easiest for you given the question.

Are they asking you to estimate something where you don't even know where to begin from the top (maybe you have 0 clue as to the market size of the industry, the GDP of that country, etc. etc.)? Then do bottom-up!

Alternatively, does it seem impossible to do a realistic from-the-ground-up estimation of something (perhaps it requires just far too many steps and assumptions)? Then do top-down!

Fundamentally, you need to take the approach that just makes the most sense in that circumstance. Quickly think about the key assumptions / numbers required and whether you 1) Know them or 2) Can reasonably estimate them. If you can, go ahead!

An Example

He's a Q&A for a great market sizing question here asking to estimate # of electric charging stations in a city in 10 years:

https://www.preplounge.com/en/consulting-forum/how-would-you-solve-this-market-sizing-question-from-roland-berger-7631

This one could be answered top-down (as I did) by estimating population of the city, # of drivers/ cars, etc. etc.

OR, it could be answered bottom-up by estimating # of stations you see per block (or # of gas/petrol tanks), % increase this might be over time (or # of EV stations that would be needed per gas tank given EV stations take 10 times as long), and # of blocks you'd estimate the city to have.

Take a look here for additional practice! https://www.preplounge.com/en/management-consulting-cases/brain-teaser/intermediate/taxis-in-manhattan-market-sizing-229

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Clara
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replied on Jun 24, 2022
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

Yes, that sounds good!

There are many ways to think about this. For instance, I would have done: 

  1. Total users
  2. # transaction each one does monthly 
  3. % of those that are done online

Given that market sizing cases were the topic of many questions in this Forum, I developped a market sizing case, that you can find for free in PrepL´s library

https://www.preplounge.com/en/management-consulting-cases/candidate-led-usual-style/intermediate/market-sizing-new-startup-launch-baby-strollers-in-the-us-244

Let me know if you have any doubts with it, it contains a detailed explanation and methodology about how to solve this specific example, but you can extrapolate to many other market sizings!

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Moritz
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replied on Jun 23, 2022
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Hi there,

As pointed out by all coaches whenever we get a request like this - share your approach first and learn from all the great feedback you'll get.

That being said, if 10 experts here were to take this question on you'd be getting 10 completely different yet equally valid answers. That's because you haven't framed any boundary conditions so it's up to us to hypothesize as to what they are. This includes things like:

  • Users: Are the bank's services being used by private or business customers?
  • Functionality: What does the service spectrum entail i.e. what could technically be done by customers of this bank?
  • Bank transfer: Does this entail any kind of transaction e.g. purchase of goods at a POS or is it just from one account to another?
  • Day: Are we looking for a yearly average and are we including or excluding weekend days?

The list goes on and on - you get the point.

I suggest you give it a shot and we'll take it from there!

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Anonymous A on Jun 23, 2022

Hi! I updated it

Cristian
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replied on Jun 23, 2022
Highest recommendation rate / Top McKinsey coach / 100% success rate at >4 sessions / Honest feedback: no sugar-coating

Hi there,

My colleagues covered your question really well below, but I'd just want to add one point. 

Remember that even for a market sizing question the interview in and of itself is a conversation. So you are not expected to come with a flawless approach end to end where you have all the data, do all the work and then just present the perfect number at the end. 

Rather see it as an opportunity to develop an approach high-level which you then present to the interview and start refining it with them. This is a chance for you to ask for additional data and any other sort of inputs you might need to get closer to the answer. 

Best,

Cristian

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Anonymous B updated the answer on Jun 23, 2022

First step would have to be an assumption regarding the # of customers the bank has. If it is a purely digital bank, maybe equivalent to a small/mid sized bank and then geographies the bank operates in is going to be a factor towards that number.

Second step could be to segment based on individual customers or businesses and then make an assumption on number of transfers made and received per day for each segment.

 

(edited)

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Ian

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