A fintech startup launched a mobile micro-loan app targeting daily wage workers. The app promised instant approvals, minimal documentation, and flexible repayment schedules. Initial downloads were high due to aggressive marketing. However, within six months, default rates increased sharply, customer complaints surged, and regulatory authorities issued warnings regarding lending practices, forcing a suspension of disbursements. Based on the scenario, what was the primary structural flaw causing the initiative's failure?

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General Studies · Business Environment

Verified Solution4 OptionsUpdated: October 2026👁️1 View

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Inadequate risk assessment protocols and weak credit profiling methodologies.

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Answer 1

Marketing expenditures exceeding the total working capital runway.

Answer 2

Competitors duplicating the app model and compressing operating margins.

Answer 3

Inadequate risk assessment protocols and weak credit profiling methodologies.

Answer 4

The target segment lacked smartphones with sufficient memory profiles.

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