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Medium Product Launch Profitability

South bank

#Financial Services
ProHub Comment

This case requires candidates to conduct market sizing analysis, compare two distribution channels (branches vs. online), and synthesize quantitative findings with qualitative country-specific considerations. The key challenge is recognizing that while the low-income segment shows attractive payback metrics, structural barriers (limited POS infrastructure, geographic dispersion, lack of financial literacy) require a more nuanced recommendation that considers geographic segmentation and channel selection.

Estimated Time 27 minutes
Difficulty Medium
Source IESE
10 / 100
South Bank (SB) is the leading retail bank in Peru, an emerging South American country. SB has a dominant performance on high-income and a very good performance in medium-income customers but has not been capable of entering to low-income market. CMO has told us that his team has been evaluating the option to launch a new credit card with cashback benefits, which are perceived as much more valuable in this segment, and the product has already shown some results in competitors. Currently, SB has a credit card with a loyalty program based on airline miles. This program is considered part of a strategic alliance with an important regional airline. The CMO would like you to evaluate if it is convenient to invest in this project.

Clarifying Information

  1. Peru has 35 M inhabitants. The local currency is PEN. Adults represent 70% of population.
  2. Country has 3 main economic segments, with clear different behaviours in credit card use.
  3. Consider Credit Card business as an independent unit of analysis.
  4. Revenues are only generated by merchant fee, a percentage of the amount paid with the card. During the last years has been stable at 2%.
  5. Each client can only have 1 credit card at the same time.
  6. To be approved, a project is required to have a payback period of 3 years. As a secondary metric, CMO prefers to generate the highest possible net cash flow in the first 3 years.
Mock Interview
Interviewer

South Bank (SB) is the leading retail bank in Peru, an emerging South American country. SB has a dominant performance on high-income and a very good performance in medium-income customers but has not been capable of entering to low-income market. CMO has told us that his team has been evaluating the option to launch a new credit card with cashback benefits, which are perceived as much more valuable in this segment, and the product has already shown some results in competitors. Currently, SB has a credit card with a loyalty program based on airline miles. This program is considered part of a strategic alliance with an important regional airline. The CMO would like you to evaluate if it is convenient to invest in this project.

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
Structure Analysis Communication Business Sense Quantitative
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Practice this case with AI Mock Interview

South Bank must evaluate launching a new cashback credit card targeting low-income customers in Peru. The case requires market sizing across three income segments, financial modeling of two sales channels, and a final recommendation balancing quantitative payback analysis with operational and commercial risks.

Key Insights:

  1. Market sizing must segment by income level and account for credit card penetration rates and market share within each segment
  2. Branch-based distribution generates 18.4M PEN vs. 7.2M PEN for online over 3 years, but branches require significant CAPEX investment
  3. Geographic analysis reveals SB lacks branch presence in most low-income regions, requiring either new branch investment or channel reconsideration
  4. The recommendation should balance financial metrics (payback period, net cash flow) with operational constraints (POS infrastructure, population density, financial literacy)
  5. Medium-income segment presents a better risk-adjusted opportunity than pure low-income focus given existing branch penetration