Should Upgrade prioritize higher credit limits on personal loans to attract more borrowers or maintain stricter lending criteria to reduce default risk?

Introduction

The trade-off we're examining today is whether Upgrade should prioritize higher credit limits on personal loans to attract more borrowers or maintain stricter lending criteria to reduce default risk. This scenario touches on the delicate balance between growth and risk management in the fintech lending space. I'll analyze this trade-off by considering the business context, user impact, technical feasibility, and potential outcomes.

Step 1

Clarifying Questions (3 minutes)

• Business Context: I'm thinking Upgrade's current growth rate might be influencing this decision. Could you share how our user acquisition and revenue growth have been trending over the past quarter?

Why it matters: Helps understand if there's pressure to accelerate growth Expected answer: Growth has slowed, prompting consideration of looser criteria Impact on approach: Would lean towards exploring higher limits if growth is a priority

• User Impact: Based on our user data, I'm assuming we have segments that are underserved by our current credit limits. Can you confirm if we've received feedback from qualified borrowers requesting higher limits?

Why it matters: Validates the demand for higher limits Expected answer: Yes, there's a significant portion of users asking for higher limits Impact on approach: Would strengthen the case for increasing limits if demand exists

• Technical Feasibility: Considering our risk assessment models, I'm curious about their current accuracy. How confident are we in our ability to predict default risk if we were to increase credit limits?

Why it matters: Assesses our technical capability to manage increased risk Expected answer: Models are robust but haven't been tested at higher limit ranges Impact on approach: Would necessitate a cautious, phased approach to limit increases

• Resource Allocation: I'm thinking this initiative might require additional resources in risk management. Do we have the team capacity to handle potential increases in default rates or customer support inquiries?

Why it matters: Ensures we can operationally support the change Expected answer: Resources are constrained, but reallocation is possible Impact on approach: Would need to factor in operational costs and potential team restructuring

• Timeline Pressure: Given the competitive landscape, I'm wondering about the urgency of this decision. Are there any market factors or competitor moves pushing us to act quickly?

Why it matters: Helps prioritize this initiative against other product roadmap items Expected answer: Moderate pressure due to recent competitor announcements Impact on approach: Would influence the aggressiveness of our testing and implementation strategy