First National Bank Golden Opportunity Case Solution

.What is the novel/unusual feature of the proposed retail financial product?

The year 2004 was relatively tough for the banks to attract depositors due to the reduction in interest rates. Moreover, the First National Bank, due to its dull reputation,lacks the ability to attract the potential depositors. Mr. Robert Kiep, a newcomer to banking in South Africa, had proposed a new retail financial saving product with a unique offer to its depositors which gave them the chance to win large cash prizes.

Unlike the traditional bank which requires some initial payment and the interest is paid according to the prevailing interest in the market, this product will give a chance to win large cash prize, which the company is offering as a headline, whereas there will be numerous small prizes given each month. The product is beneficial for the low income households. Mr. Robert Kiep has targeted this product at just the right place where the majority of the population of the country comprises of low income households.

2. Under what conditions this product might be attractive for the bank?

With the prime mantra for every bank that is “No Deposit No Bank” and the current conditions of the First National Bank are not favorable in the terms of the attractiveness of the depositors due to not only its dull reputation as well as the reduction in interest rate in 2004, the product is only attractive for the bank if it is successful in attracting large number of depositors due to its unique unusual feature and that it becomes successful in establishing FNB’s brand as retail investment bank.

Moreover, if the product does not create any legal charges for the bank as the features of the new product are similarly like a lottery system,then the government should establish monopoly on lottery products.

3. From the perspective of the customer, is the product attractive? What assumptions about individuals' attitudes to risk (e.g., expected utility, prospect theory, etc.) would you need to make in order to justify your answer?

Customers are always focused on the cost to benefit analysis. If the product is successful in providing more benefits in the lowest cost as compared to the other products prevailing in the market, then the product is definitely attractive for the customers. The product which is proposed by Mr. Robert Kiep, if approved by Mr. Michael Jordaan, the CEO of First National Bank’s Retail Customer solution division, then as a result he could provide benefits to his customers. With the features of no principal loss, some liquidity and the chance to win massive amount of cash each month, therefore it could be said that the product is attractive from the perspective of the customers...................

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