How can Curve balance offering higher cashback rates on its card to attract users versus maintaining sustainable profit margins?

Introduction

Balancing higher cashback rates to attract users while maintaining sustainable profit margins is a critical challenge for Curve. This trade-off directly impacts user acquisition, retention, and the company's financial health. I'll analyze this problem by examining the product ecosystem, key metrics, and potential experiments to inform a data-driven decision.

Step 1

Clarifying Questions (3 minutes)

• Context: I'm thinking about Curve's current market position. Could you share insights on our user growth rate and competitor landscape?

Why it matters: Helps gauge the urgency of user acquisition vs. profitability Expected answer: Moderate growth, increasing competition Impact: Higher growth might justify more aggressive cashback rates

• Business Context: Based on our revenue model, I assume interchange fees are a significant income source. How reliant are we on these fees versus other revenue streams?

Why it matters: Determines flexibility in adjusting cashback rates Expected answer: Heavily reliant on interchange fees Impact: Less reliance would allow for more aggressive cashback rates

• User Impact: Considering user segments, are we targeting specific high-value users or aiming for broad adoption?

Why it matters: Influences cashback strategy (targeted vs. universal) Expected answer: Mix of broad adoption and high-value user focus Impact: Targeted approach might allow for higher rates for specific segments

• Technical: How flexible is our current system for implementing variable cashback rates?

Why it matters: Affects our ability to test and implement complex cashback structures Expected answer: Moderately flexible, some development required for major changes Impact: Less flexibility might limit our options for nuanced cashback strategies

• Resource: What's our current budget allocation for user acquisition versus other initiatives?

Why it matters: Helps prioritize cashback strategy against other growth levers Expected answer: Significant portion allocated to user acquisition Impact: Higher allocation could justify more aggressive cashback rates