Why has the average loan amount requested through Tala's instant credit service in Mexico declined by 20% over the past quarter?

Introduction

The decline in average loan amount requested through Tala's instant credit service in Mexico by 20% over the past quarter is a significant issue that requires thorough investigation. This analysis will systematically identify, validate, and address the root cause while considering both immediate and long-term implications for Tala's business in Mexico.

Step 1

Clarifying Questions (3 minutes)

• Looking at the timing, I'm thinking there might be seasonal factors at play. Has this 20% decline been compared to the same quarter last year?

Why it matters: Seasonal trends could explain the fluctuation and help determine if this is a cyclical issue. Expected answer: Yes, it has been compared, and the decline is still significant. Impact on approach: If seasonal, we'd focus on year-over-year comparisons rather than quarter-over-quarter.

• Considering user segments, I'm curious about the distribution of this decline. Is the 20% decrease uniform across all user segments or concentrated in specific groups?

Why it matters: This helps identify if the issue is systemic or related to particular user demographics. Expected answer: The decline is more pronounced in younger borrowers and first-time users. Impact on approach: We'd focus on understanding the needs and behaviors of these specific segments.

• Thinking about recent changes, have there been any significant updates to the loan application process or credit scoring model in the past quarter?

Why it matters: Product or policy changes could directly impact loan amounts requested. Expected answer: A new credit scoring algorithm was implemented two months ago. Impact on approach: We'd investigate the impact of this algorithm on loan approvals and amounts.

• Considering market dynamics, has there been any notable change in competitor offerings or marketing strategies in Mexico recently?

Why it matters: External market pressures could influence user behavior and loan requests. Expected answer: A new fintech entered the market with aggressive marketing for smaller, more frequent loans. Impact on approach: We'd analyze our competitive positioning and user preferences for loan structures.