Question

Royal Bank currently sells transactional products through its branch network. Royal Bank is considering switching
to using digital channels exclusively. At the moment, 5% of the branch accounts close at the end of the year they
are booked, but then the remainder stay active for the next 2 years.
Accounts booked through digital channels are significantly less loyal; 30% close at the end of first year after being
opened. 10% of those who remain after year 1 will close at the end of year 2, and then the remainder stay active
after that.
The branch network currently sells 500,000 accounts a year at a cost of R2,500 per account sold and then each
account generates R150 revenue per month while on book. The digital channel currently sells 1 million accounts a
year at a cost of R150 per account and then each account generates R50 revenue per month.
Which channel is more valuable to the bank over the next 3 years? Assume all sales happen on day 1 of each year

Answer 1

Answer:

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