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Hard Profitability Market Entry Business Case Development

PayCo

#Technology #Financial Services #Payment Technology #Transit
ProHub Comment

This is a well-structured financial modeling case that tests a candidate's ability to synthesize multiple data sources, perform basic financial analysis, and develop strategic recommendations. The case emphasizes the importance of focusing on risk-adjusted opportunities rather than raw market size, and requires candidates to identify sunk costs and think critically about assumptions.

Estimated Time 15 minutes
Difficulty Hard
Source Cornell
50 / 100

Your role on the PayCo engagement is to develop the business case for commercializing PayCo’s contactless technology

  1. Which market and transit vertical should PayCo target as a first priority?
  2. What is the profitability of the “TAP” technology? Specifically, will PayCo break even on commercializing “TAP” in less than 5 years?
  3. Would you recommend that the client pursue the commercialization of this technology?

Clarifying Information

Business Context:

  1. PayCo is a global credit card company with revenues over $5B in 2010
  2. PayCo has developed proprietary contactless payment technology called “TAP” for transit applications
  3. The transit vertical (subways, trains, buses, taxis) is identified as a growth opportunity since it is generally cash dominated
  4. A key challenge is whether transit authorities will implement this new technology or stay with current systems for fare collection

Data Provided:

  • Exhibit 1: Country-level data (US, England, Japan), Subway System Data (NYC, London, Tokyo), and Buses Data (NYC, London, Tokyo)
  • Exhibit 2: NYC Subway Forecast Data with transaction projections and TAP Assumptions for revenues and costs