Mckinsey case question

Market sizing McKinsey
New answer on Sep 24, 2021
5 Answers
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Anonymous A asked on Sep 22, 2021

A friend of mine was asked this in his final round in Mckinsey:

Estimate the market size of the banking sector in country X.

The bank only serves individuals - no corporates. 

(structure only, no numbers required)

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Anonymous B replied on Sep 23, 2021

Underneath is my approach. I am open for feedback.

Clarifying question:

What is meant by ‘market size’? Is it (a) the total money in the banking system relevant to individual banking OR (b) total revenue in the banking system because of individual banking solutions.

Presuming the answer is (b), I would use a top-down approach structured underneath:

There are five major services in individual banking market:

1. Savings and Checking Accounts : Total Revenue = Avg. Revenue per $1000 in the account x Avg. Account size (in $Ks)  X number of accounts

Number of Accounts could be estimated by segmenting the number of households in the country to:

0 Account: 10% HHs (Extremely Low/No Income)

2 Accounts: 40% HHs (Lower Income) 

4 Accounts:  40% HHs (Middle Income)

6 Accounts: 10% HHs (High Income)

2. Debit and Credit Cards Total Revenue = [Avg. fees from account holders + Avg. Transaction fee from Merchants x Avg. Annual Transaction/card] x Number of cards

Number of cards can be estimated with HH market sizing approach laid out above.

3. Loans Can be estimated with similar approach 

4. Investment and Wealth Management Can be estimated with similar approach

5. Insurance Can be estimated with similar approach

After laying out the structure, I would offer to move forward with Savings and Checking Accounts  if okay  with the interviewer. 

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Ian
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replied on Sep 22, 2021
BCG | 100% personal interview success rate (8/8) and 95% candidate success rate | Personalized interview prep

Hi there,

Sorry, do you have a question?

Did you want us to provide a structure/answer?

If you can provide what you think a good approach is, we can critique it - truly the best way to learn!

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Antonello
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replied on Sep 23, 2021
McKinsey | MBA professor for consulting interviews

Hi!

Interesting case.

Why don't you propose a structure that we can review? I believe it's best to learn.

Best,

Anto

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Udayan
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replied on Sep 23, 2021
Top rated MBB coach with many offers /Ex McKinsey EM in New York /6 years McKinsey recruiting experience/Real cases

Just to second what Ian said, do more than just ask someone else to solve it, it is a lot better to get feedback on an approach vs posting a question.

 

Udayan

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Agrim
CoachingPlus Expert
replied on Sep 24, 2021
#1 CoachingPlus Expert | 100% no-nonsense | BCG Dubai PL | 2021 Real MBB+ Cases | Case/PEI/Fit/CV | 6+ years Consulting

Best is to try it out yourself and provide us a solution that we can give feedback on.

Ideally I would consider the following elements:

  • # of bankable people - using a granular population breakdown and a slew of clarifying questions - ultimately segment into poor/avg/rich
  • Available banking products
  • Estimate the typical NRV (Net Relation Value) - this will be a crucial framework to get right - take an average Joe - then create similar versions for rich and poor people.
  • Roll-up the analysis and get a final value
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