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Medium Cost Reduction Operations Management Operations

Fragrant Harbour

#Financial Services
ProHub Comment

This case tests operational problem-solving with a clear root cause: the 90% error rate on first applications creates significant rework and delays. The key insight is identifying that branch incentives misalign with quality (rewarded for volume, not accuracy), and that early quality checks can dramatically reduce total process time. The quantitative second prompt validates the recommendation's business impact.

Estimated Time 26 minutes
Difficulty Medium
Source HKUST
20 / 100
Fragrant Harbour (FH) Bank is a small bank operating in Hong Kong serving mostly local consumers. It had recently found that the credit card line of business had been losing a lot of customers. FH Bank suspects the credit card application process may be to blame. The COO of FH Bank has asked us to investigate this further: What in the credit card application process is causing the most issue?

Clarifying Information

  1. The steps required for an application are provided in Exhibit 1.
  2. Each step is required and cannot be performed in parallel.
  3. If applications have incorrect or missing information, they are sent back to the branch for an employee to call the customer to resubmit an application.
  4. Regulations prohibit the digitization of applications for transferring.
  5. The average application at FH Bank takes 30 days to process.
  6. The average application without errors or omissions takes 15 days to process; this appears to be the industry average.
  7. 90% of first applications have at least one error or omission found during the “Check application” step.
  8. All employees are following protocol for submitting applications.
  9. Branch employees are incentivised to maximize applications sent.
  10. Customers are pre-selected for invitation to apply based on past relationship with bank; effectively anyone who is invited in the first place will be approved, given that applications sent are complete.
  11. Customers leave because they are frustrated with the bank service; this can happen anytime after the application is first rejected.
  12. Competitors have essentially identical application processes; the only discernable difference is that they can complete it faster.
  13. Competitors are subject to the same regulations as FH Bank.
  14. The credit card offered is essentially a commodity; there is nothing unique about its credit limit, rewards programs, annual fees, etc.
  15. All phone or online channels for application invitations funnel back to branch applications for regulatory purposes.
Mock Interview
Interviewer

Fragrant Harbour (FH) Bank is a small bank operating in Hong Kong serving mostly local consumers. It had recently found that the credit card line of business had been losing a lot of customers. FH Bank suspects the credit card application process may be to blame. The COO of FH Bank has asked us to investigate this further: What in the credit card application process is causing the most issue?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
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FH Bank’s credit card application process takes 30 days versus a 15-day industry standard. Analysis reveals that 90% of initial applications contain errors, causing rework delays. Root causes are: late-stage quality checks (midway through process) and branch employee incentives favoring application volume over completeness. Solution: implement early error checking and realign incentives toward quality, potentially freeing 1,950 work hours annually.

Key Insights:

  1. Sequential process design with late quality checks creates compounding delays when rework is necessary
  2. Misaligned incentives (maximize volume sent vs. maximize complete applications) drive problematic behavior
  3. 90% error rate is the critical metric revealing the severity and suggesting a root cause in branch operations
  4. Early process quality gates can eliminate most rework without regulatory constraints
  5. Quantifying the time savings (1,950 hours/year) validates the recommendation’s business case