Why has Upstart's personal loan approval rate dropped by 15% over the last month?

Introduction

Upstart's personal loan approval rate dropping by 15% over the last month is a significant issue that requires immediate attention. This decline could have far-reaching implications for the company's revenue, customer satisfaction, and market position. I'll approach this problem systematically, focusing on identifying the root cause, validating hypotheses, and developing both short-term and long-term solutions.

Step 1

Clarifying Questions (3 minutes)

• Looking at the timing, I'm thinking there might have been a recent change in the approval algorithm. Has there been any update to the loan approval model in the past month?

Why it matters: Algorithm changes can significantly impact approval rates. Expected answer: Yes, there was a minor update. Impact on approach: If confirmed, we'd focus on the algorithm's performance and potential unintended consequences.

• Considering the scale of the drop, I'm wondering about market conditions. Have we seen any significant changes in the broader lending market or economy in the last month?

Why it matters: External factors could be driving the decline. Expected answer: No major market shifts. Impact on approach: If true, we'd focus more on internal factors and Upstart's specific processes.

• Given the specificity of the 15% drop, I'm curious about our data accuracy. Can we confirm that our measurement systems are functioning correctly and consistently?

Why it matters: Ensures we're addressing a real issue, not a data anomaly. Expected answer: Yes, data systems are accurate. Impact on approach: If confirmed, we can confidently move forward with our analysis.

• Thinking about user segments, I'm wondering if this drop is uniform across all borrower profiles. Do we see any patterns in terms of credit scores, loan amounts, or other demographic factors?

Why it matters: Helps identify if the issue is systemic or specific to certain user groups. Expected answer: The drop is more pronounced in certain segments. Impact on approach: If true, we'd focus on understanding what's unique about the affected segments.