Why has Extra (Financial Services)'s credit card application approval rate dropped by 15% over the past month?

Introduction

The recent 15% drop in Extra's credit card application approval rate is a critical issue that demands immediate attention. As we analyze this product challenge, we'll employ a systematic framework to identify, validate, and address the root cause while considering both short-term fixes and long-term strategic implications.

Our approach will involve a thorough examination of internal and external factors, data analysis, and hypothesis generation. We'll prioritize efficiency in our investigation while ensuring we cover all potential angles. Let's begin by clarifying the situation and ruling out basic external factors before diving deeper into the product ecosystem and user journey.

Step 1

Clarifying Questions (3 minutes)

• Looking at the timing, I'm thinking there might be a recent change in our credit scoring model. Has there been any update to our risk assessment algorithms in the past month?

Why it matters: Changes in credit scoring can directly impact approval rates. Expected answer: Yes, there was a minor update to the algorithm. Impact on approach: If confirmed, we'd focus on validating the new model's performance.

• Considering user segments, I'm curious about the distribution of this drop. Are we seeing a uniform 15% decrease across all applicant demographics, or is it concentrated in specific groups?

Why it matters: Helps identify if the issue is systemic or segment-specific. Expected answer: The drop is more pronounced in younger applicants. Impact on approach: We'd investigate factors specifically affecting younger applicants' creditworthiness.

• Given the current economic climate, I'm wondering if there's been a significant change in the overall quality of applicants. Have we seen any shifts in average credit scores or income levels of applicants?

Why it matters: External economic factors could be driving changes in our applicant pool. Expected answer: There's been a slight decrease in average credit scores. Impact on approach: We'd need to consider adjusting our marketing strategy or credit criteria.

• Thinking about our application process, has there been any recent change in our user interface or application flow that might be impacting completion rates?

Why it matters: UI/UX changes can affect user behavior and application quality. Expected answer: No significant changes to the application process. Impact on approach: We'd focus more on backend processes and credit criteria rather than user experience issues.