There are a few phrases that people use with great confidence, even though their understanding might be quite inaccurate. During a few recent conversations, I’ve realized that “Instant Prescreen” is one of those phrases. Perhaps due to claims of misinformed vendors or its seeming similarity to older prescreen techniques; it is radically misunderstood by many. This is extremely unfortunate because with the increase in online and mobile usage by consumers, it will become an even more valuable acquisition technique for financial institutions (FIs).
While describing the capabilities of instant prescreen at an industry conference, one of my colleagues was told with confidence that it was impossible as we described it. In fact, it is possible and a few banks have been doing it successfully for nearly two decades. My goal in this article is to clarify the way instant prescreen works, how bankers can distinguish it from the more common batch prescreen solutions and utilize it effectively in digital banking.
In short, instant prescreen is a process that allows a realtime credit decision, using a current credit file, the same credit models and analytics as consumer initiated credit decisions, with a hard offer of credit made to the consumer without stipulations or further evaluation. The more common batch prescreen approach is nearly the opposite. Batch prescreens were developed to support direct mail programs, primarily for credit card products. The selection criteria are typically much less precise than a credit decision, but consumers of sufficient credit quality are identified to ensure that sending a mailing would be a reasonable investment. For example, an FI might request all consumers within a zip code with credit scores over 680 who are not current customers and have no more than 5 credit cards. The range of information available for the decision is limited, often to a few key attributes and a score.
In order to manage the cost of datasets that might include millions of records, the credit bureaus run the selection criteria against an offline set of credit reports. Since most creditors report to the bureaus on a monthly basis, the data might be 2 months old when the list is pulled. By the time the consumer responds to the postal mail offer, the marginally accurate credit decision could be 3-4 months old. Given the error introduced into the process, a more complete credit review is required before credit is approved. These offers are frequently called an “invitation to apply,” since they are not truly a hard offer of credit.
Now to contrast instant prescreen:
1) The decision is made in realtime. Depending on your vendor, it might be in milliseconds. Compare this to a batch process that runs overnight and might offer decisions that are weeks old.
2) The credit data is current, at least as current as the bureau is able to provide. Most instant prescreen decisions are presented at a moment of interaction with the consumer, so acceptance only lags the credit decision by a few seconds. That means no follow up review is needed—it is a final credit decision.
3) Only one consumer at a time is evaluated. An original trade name for instant prescreen was Prescreen-of-One, to call out how different it is from solutions that screen consumers by the millions.
4) Instant prescreen pulls a full credit report from the bureau, not just a score or key attributes. This means that a comprehensive credit decision can be made, regardless of how complex a FIs credit policy might be. The same policy can be used in prescreen as is used for consumer initiated requests.
5) This is a credit decision, not a marketing decision. Unlike an invitation to apply, a hard offer of credit is made without stipulations. Consumer acceptance and satisfaction are radically higher when you present a fully vetted offer instantaneously.
In an increasingly digital world, consumer expectations are changing. Credit offers made online must be fast, accurate, and final. Instant prescreen closes the gap to allow FIs to make offers that will resonate with a customer base seeking immediate gratification. There are many valid uses for batch prescreen or invitation to apply as part of a broader strategy for customer growth. However, telling an online customer that their FI will need days or weeks to complete a credit decision is no longer viable.
Instant prescreen offers, presented to consumers during a moment of interaction yield tremendous acceptance rates and are highly profitable. The next time you are discussing mobile or online account opening, or debating making offers through digital channels, ask your colleagues what they think instant prescreen really means. They may be planning to create a realtime interface to an offer repository of stale, incomplete offers. Challenge them to do better. If you are a fan of the Princess Bride, simply state, “I do not think it means what you think it means”.