Online credit comparison portal wants to grow its business (market sizing + strategic case)

Samuel asked on Nov 08, 2018 - 2 answers

Dear preplounge-community,

I have quite an open case that I got asked in an interview with which I heavily struggled. I was wondering how you would approach the case?

The case goes as follows:
You are working for a leading online credit intermediary, i.e. the company has an online platform (comparison portal) on which private consumers are offered loans from banks. There are 2 main competitors who also offer loans on an online platform and which have a similar portfolio of banks. The CEO asks you the following questions:

  1. Market sizing
    1. What is the monthly additional credit volume a bank can attain when our client includes it on its platform?
  2. Strategic
    1. Which banks should the client include in its portfolio from the point of view of competition?
    2. Why do these banks offer a real value-add to the end-consumers?
    3. Which banks should be added to the portfolio that are not yet part of any other comparison portal?

I would really appreciate your views on this one – sure let me know if you have just a view on one of those questions :)

Thanks a lot in advance!

Best,
Andreas

(edited)

2 answers

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Anonymous A replied on Nov 08, 2018

Hi Samuel,

Thanks for sharing your example, it is quite an interesting case. I will try to answer the questions, please suggest improvements and we can have a dialogue about it.

1. Market sizing

population of country (assuming client operates in only 1 country) * % of people in age group to apply for loans (here we can segment and say based on type of loan - education, home loan, personal loan, etc) * % of people likely to check online (use assumption of internet savvy population) * likelihood of selecting your bank (based on competitve assessment of diff banks by loan type) * probability of your bank financing loans (based on rejection rate by loan type) * size of loan per customer/avg no. of years per loan/12.

2.i Which banks to include:

select the banks based on 4 key parameters:

- customer preferences (must have banks in your comparison list)

- financial stable (known banks which have good track record and low rejection rate)

- offer diversified loan terms based on customer wallet

- benefit to you (the client) - % comission per loan, no. of views, no. of sales leads, perception management for banks to entice new customers, marketing gimmick which helps them sell products through online channel --> what is the benefit client brings to the bank and what is bank ready to pay/support in return. this will depend on client's bargaining power vs banks

2.ii. simplified comparison, objective perspective highlighting pros and cons, market analysis before making a decision and educating customers on do-it-yourself calculations

2.iii. select banks which are not part of competitor having following :

- local/regional banks with avergae or good loan terms

- banks entering new markets or having growth focus, but have risk limits with tolerance levels

- other companies which could think of expanding into loan market (e.g. Paypal, Visa) through their online channel

Apologies for the long answer :) Let me know what you think.

Samuel updated his answer on Nov 09, 2018

Thanks a lot! That is an interesting view and great help! Here my thoughts:

  1. Market sizing
    1. What is the monthly additional credit volume a bank can attain when our client includes it on its platform? --> totally agree
  2. Strategic
    1. Which banks should the client include in its portfolio? --> I agree with the dimensions you want to look at. However, maybe this question should/could be answered (more easily) using a profitability framework in a more straightforward way? At the end of the day we want to make money. So maybe we could look at it from a quantitative perspective (%commission, rejection rate, etc.) and from a qualitative perspective (customer preferences, financial stability etc.) Question to you: You list rejection rate under “financial stability” though I would put it in “benefit to you (the client”). Agree? What do you mean with “perception management”. How would you define “good track record”?
    2. Why do these banks offer a real value-add to the end-consumers? --> Here, I don’t completely agree with the answer/maybe we understand it differently. Maybe, the answer is more along if 2i holds (specifically, low rejection rate, diversified loan terms) then this is helpful to the end consumer because the likelihood of getting a loan is higher? What do you think? Maybe there is a more structured approach to this?
    3. Which banks should be added to the portfolio that are not yet part of any other comparison portal? --> Agree. I would put this in addition to 2i meaning that 2i must hold plus the additional criteria you mentioned here. Question: Is there maybe an opportunity to make this more MECE?

By all means, thanks a lot already! …and maybe you have some additional thoughts? :)

Best,
Andreas

(edited)

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