Product Management — Guesstimates |Number of ATMs in India
Hi there!
If you’ve recently started going through Guesstimate exercises for your PM interview, you know that in a PM interview setting, guesstimates are hypothetical estimation questions designed to assess your ability to think critically, make quick assumptions, and arrive at a reasonable solution under pressure, which a PM does on a daily basis.
In this article, we are going to solve one such exercise —
Estimate the number of ATMs in India
(Before jumping onto mental calculations or slipping into panic mode, it’s necessary to take a minute and think about the structure of the problem and make sure we comprehend what’s asked)
Taking a structured approach, let’s start by clarifying the question and the scope with the interviewer (Re: means response from the interviewer)-
- My understanding of an ATM is — An Automated Teller Machine is a self-serving banking kiosk used to check balance, withdraw money, transfer, and even deposit money. Is my understanding of the scope correct? or are we considering any other type too?
[Re: That’s correct, let’s go with it]
2. Are we considering the ATM of any particular financial institution?
[Re: No, it’s open to all banks]
3. Should we only consider active ATMs?
[Re: Sure]
4. Any geographic constraints?
[Re: No, consider it to be pan India]
(Now that we have the answers to our questions, the next step is to choose the structure or flow of the guesstimate exercise. For this example, we are following a Top-Down approach)
The idea here is that we’ll estimate the number of ATMs in India by figuring out the #ATM card users.
- The population of India — 1.4 bn
Out of this, the current Urban-Rural split stands at 3:7
Therefore,
- Urban India population = ~400mn
- Rural India population = ~1 bn
Assuming the household size in India to be 4,
- Number of families in Urban India = ~100mn
- Number of families in Rural India = ~ 250mn
At this point, we have to make an assumption based on how many families in India would have one or more ATM users.
Hypotheses: ATM is used only by people who have an ATM card linked to a bank account. Therefore, for rural India, we can assume that all the individuals who have regular access to banks will have access to ATMs too. For this reason, we can keep the low-income class (below 20K INR earnings) out of this group. Similarly, we can eliminate the low-income class from Urban household consideration too.
- Assuming 60% of rural households have ATM user(s). ~150mn
- Assuming 90% of Urban households have ATM user(s). ~90mn
Hypotheses: One family might have more than one ATM user in a family.
- Assuming 10% of rural households have 2 users per family & 90% have only 1
- Assuming 30% of urban households have 2 cards per family & 70% have only 1
Therefore, the total ATM users in rural India
2 cards per family [2*(10% of 150mn) = 30mn] + 1 card per family [90% of 150mn = 135mn] = ~160mn
and, the total ATM users in urban India
2 cards per family [2*(30% of 90mn) = 54mn] + 1 card per family [70% of 90mn) = 63mn] = ~120mn
Hypotheses: Based on my experience of living in different parts of India, the number of ATMs per user in Rural India would be lower than in Urban India because of factors like frequency of usage, technology constraints, resource constraints, etc.
Therefore, assuming one ATM/5000 users in Rural India, and one ATM/500 users in Urban India,
ATMs in rural India = 160mn/5000 = 32,000
ATMs in Urban India = 120mn/500 = 240,000
Total ATMs in India ~ 270,000
Fact check: In 2022, there were over 249 thousand automatic teller machines (ATMs) across India
And, that’s a wrap! Hope you found this exercise helpful. Here are a few more guesstimate exercises for you to practice:
