Should Simpl prioritize expanding its merchant network for the Pay Later service or focus on improving credit assessment algorithms for existing users?

Introduction

The trade-off question at hand is whether Simpl should prioritize expanding its merchant network for the Pay Later service or focus on improving credit assessment algorithms for existing users. This scenario involves balancing growth through network expansion against risk management and user experience improvements. I'll analyze this trade-off by examining the product context, potential impacts, key metrics, and experimental approaches to inform a strategic recommendation.

Step 1

Clarifying Questions (3 minutes)

• Business Context: I'm thinking Simpl's revenue model is likely based on transaction fees and potentially interest on late payments. Could you confirm the primary revenue streams and their relative importance?

Why it matters: Helps prioritize growth vs. risk management strategies Expected answer: Transaction fees are primary, with interest as secondary revenue Impact on approach: Would influence the balance between merchant expansion and credit algorithm improvement

• User Impact: Based on the nature of Pay Later services, I assume we have both consumers and merchants as key user segments. Can you provide insights into the current user base size and growth rates for both segments?

Why it matters: Helps identify which user segment needs more focus Expected answer: Consumer base growing faster than merchant network Impact on approach: Might suggest prioritizing merchant expansion to balance the ecosystem

• Technical Feasibility: Considering the complexity of credit assessment algorithms, I'm curious about our current technical capabilities. How advanced is our current credit assessment system, and what resources would be required to significantly improve it?

Why it matters: Determines the feasibility and potential impact of algorithm improvements Expected answer: Moderate sophistication with room for improvement, requiring significant data science resources Impact on approach: Could influence the timeline and resource allocation for algorithm enhancement

• Resource Allocation: Given that both options require different skill sets, I'm wondering about our current team composition. Can you share insights on our team's strengths in business development (for merchant expansion) versus data science (for algorithm improvement)?

Why it matters: Helps assess the feasibility of each option based on current capabilities Expected answer: Balanced team with slight edge in business development Impact on approach: Might favor merchant expansion in the short term while building data science capabilities

• Timeline and Urgency: Considering market dynamics, I'm thinking about the competitive landscape. How urgent is our need to expand market share versus improving our risk management?

Why it matters: Helps prioritize short-term growth versus long-term sustainability Expected answer: Moderate urgency for both, with slightly higher pressure on growth Impact on approach: Could suggest a phased approach, starting with merchant expansion followed by algorithm improvement