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A Credit Marketing Strategy that Hits the Mark

Eric Lindeen by Eric Lindeen
March 20, 2013
in Industry Opinions
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An interesting development in the credit market is the increasing role of instant prescreen in account growth strategies. At a time when many marketing efforts designed to grow accounts are too costly and often ineffective, instant prescreen stands out from the crowd. As a result most large financial institutions (FIs), and a growing number of community and regional FIs, are making instant prescreen a core part of their account growth strategy.

Challenges of Traditional Marketing

The ROI of established acquisition methods like direct mail continue to decrease. Acceptance rates are less than one percent and continue to drop for prime consumers who are oversaturated with offers. Take-one applications have gone the way of the cigarette machines they once adorned. While online applications provide great value, consumers rarely complete them without an expensive marketing campaign to entice them. All of these programs play a role in a balanced growth strategy, but none have the impact they once did.

The biggest challenge to traditional credit marketing approaches is that consumers are more likely to accept offers when they are already thinking about their finances. Most traditional advertising is presented to consumers when they are thinking about something else. Financial institutions need a solution that will allow them to qualify prospects when the prospects are engaged and thinking about their financial situation through any channel; online, mobile, branch, call center, or even at the ATM.

Consumers have little patience to wait for an FI to make a credit decision; they expect a near instant response regardless of the channel. Online responses must be completed in seconds. When offering auto loans through a dealer, our research with an indirect lender showed that improving response time by thirty seconds doubled the number of offers accepted. To improve the speed of transactions it is necessary to eliminate manual steps in the origination process with real-time automation. Additionally, this can significantly reduce the labor cost of underwriting applications.

Introducing Instant Prescreen

Instant prescreen is a powerful approach for pre-approving consumers for credit offers at any point of interaction, without requiring a consumer to initiate the request. It is able to work behind the scenes while your original transaction is being completed. For example, consider a consumer opening a checking account in the branch. An instant prescreen can evaluate the consumer for overdraft protection, a credit card, or even an auto loan. If a pre-approved offer is returned, it is immediately presented to the customer. Your staff will be more willing to cross-sell products when they see increased acceptance and you’ll sell more products when consumers are able to easily accept.

Prescreen platforms allow institutions to reduce the costs of broad marketing campaigns, in favor of targeted personalized offers at multiple points of interaction. Our clients have reported a consistent 20-30 percent acceptance rate on these platforms, significantly higher than the average batch prescreen acceptance rate of .6 percent. Part of this advantage comes from the ability to tailor each offer to the consumer. Unlike generic batch processes, instant prescreen offers can incorporate marketing and non-traditional credit data to better understand the consumer’s needs. Predictive models can also determine the product most likely to be accepted and whether it is even worth making an offer to the consumer at during a particular interaction. All of this can only happen when sophisticated analytics are built into the platform’s capabilities.

There are numerous other benefits to instant prescreen. You can use the same credit decisioning policy for instant prescreen as you would if the consumer initiated the transaction. This is not possible when doing batch processing because the data returned only includes a restricted amount of information. Additionally, batch offers need a second round of decisioning once a consumer accepts to verify the consumer still meets the criteria for the offer. With instant prescreen you can book the account and issue an account number or actual card right on the spot.

Less Junk, More Relevance

There is a great opportunity for banks to focus on deepening relationships with the customers they already have by making tailored offers at every interaction. Mining their data to uncover the best product to present is much more effective than presenting a generic offer to everyone that walks in the door or logs on to the website. In some cases, the best decision might be to not present an offer at all. This scenario promotes a more positive interaction with the customer than offering something completely irrelevant to their needs or lifestyle.

Incorporating instant prescreen into the marketing strategy allows banks to enjoy more profitable and effective account growth. It allows a targeted and personalized offer to be presented at just the right time. I’d much rather be given one meaningful offer than a stack of junk mail. Having the intelligence to know the difference yields higher acceptance and fewer offers in the round file.

Eric Lindeen is a champion for improving the lending process and helping financial institutions compete more effectively. During his time at Zoot Enterprises, he has helped lenders develop and deploy complex solutions for credit origination. His 20-plus years of experience in marketing and technology enable him to bridge the gap between business strategy and IT practice. Lindeen is now responsible for Zoot’s marketing efforts and sharing Zoot’s industry expertise.

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