Katkat
Back

Evaluate a credit-card acquisition partnership

Capital OneData Scientist · Onsite
MediumData ScientistOnsiteAnalytics & Experimentation

Last updated

This question evaluates cohort-level unit economics, discounted cash-flow (NPV) modeling, and sensitivity/break-even analysis related to customer acquisition and credit-card portfolio economics.

You’re evaluating a co-branded partner that can deliver 50,000 new credit-card customers. Assumptions (Year 1 unless stated):

  • Activation rate: 80% (only activated users generate economics).
  • Monthly spend per activated user: $600 for 12 months.
  • Interchange revenue: 1.5% of spend.
  • Rewards cost: 1.2% of spend.
  • Annual fee: $95 collected in month 1 from 25% of activated users.
  • Servicing cost: $1.00 per user per month.
  • Expected credit loss (bad debt): $24 per activated user over 12 months.
  • Partner economics: $70 CPA to partner + $100 signup bonus per activated user.
  • Discount rate: 10% annually (assume monthly discounting at 10%/12). Tasks:
  1. Compute the 12-month NPV per acquired user and total NPV for the cohort. Show all components: interchange, rewards, fees, servicing, credit loss, and acquisition costs.
  2. Derive the break-even CPA (holding other assumptions fixed).
  3. Sensitivity: Recompute NPV for (a) interchange ±0.3 pp, and (b) credit loss ±$10. Identify which variable the decision is most sensitive to and state your recommendation.