Card issuers got burned with their first round of online applications because of adverse selection: All sorts of uncreditworthy people could go from site to site filling out applications, and some issuers found themselves rejecting most of their applicants.
Yet, in this burgeoning Internet age, online applications are now ubiquitous and will ultimately replace paper ones. A typical junk-mail envelope has one offer, but Web sites can offer hundreds of options, including co-brands, designs, rates, and terms.
There are several measures that card issuers can take to improve both their sites and their application pools.
Issuers have begun to deal with adverse selection by putting private URLs in their paper solicitations. Anybody can go to www.mbna.com and fill out an application, but not everyone has received an offer from MBNA that mentions the private URL.
These mailings also include a unique reservation or RSVP number, which gives the recipient access to the online application. For instance, only people whom MBNA has identified as desirable applicants can apply at www.applyonlinenow.com/creditcard.
Some other examples of private URLs are First USA's www.sendmethecard.com, J.P. Morgan Chase's www.mychasecard.com, and Capital One's www.getmycard.com.
The data entry process also needs improvement - issuers tend to ask for too much.
Citibank has made advances on this count: Its site first determines if the applicant already has an account with the bank, then it pre-fills the account information and double-checks it against current data, to help the bank give the applicant a credit score.
Forms that are broken down into a dozen or so pages, with a set of fields on each, are much less tedious and communicate the terms more effectively than endless scroll-down applications. Wells Fargo's is a good example of a clean, well-organized application process.
Unfortunately, many issuers are poor at indicating what specific information is needed in a given field; the more frequent use of drop-down menus, along with more finely tuned error alerts, would improve the accuracy of applications.
Here are some ideas that could enhance the online application process:
- Asking for an apartment only if the street address matches that of an apartment building in a national residential database.
- Creating past address and employer fields only if the current salary is below a certain threshold.
- Allowing for the electronic submission of financial statements, tax returns, or W-2s where models indicate shaky financials.
- Creating an interactive dialogue to get additional information
Flexible workflow should also be introduced. Wells Fargo and Bank of America have "save application" features. Capital One offers a substitute card offer, at higher rates, instead of a flat turn-down. Extra pages - such as Citibank's set of vehicle ownership questions - help the issuer authenticate the applicant's data.Disclosures are now an integral part of online applications, since issuers can verify that the applicant has opened the page and agreed to the terms stated.
Decisions are now mostly advertised as "instant," meaning up to 2 minutes. However, this is inconsistent in practice. We see large numbers of "deferred" decisions. We've never seen an "instant" decline, but have seen a follow-up decline by e-mail.
Post-approval online follow-ups could also be improved. Target and Fleet give their customers an immediate account number (plus expiry data and panel code) to enable instant online shopping. However, some issuers, such as MBNA, offer "instant" decisions only via telephone.
Most issuers seem not to offer immediate enrollment for online access, Verified by Visa, or online payment.
Why shouldn't online access be a mandatory part of an online approval? Juniper is making advances in this area. After it makes an online approval, it takes the customer directly to the online access enrollment process. It also let an applicant know via e-mail when an application has been denied, as well as the reasons for it.
Assigning a temporary user ID and password could increase the overall success rates for enrollment. Issuers could ask for a bank account number for online payments that immediately follow an approval.
The time restrictions imposed on solicitations also seem foolish. Standing offers at a private URL could eliminate the expense of repeatedly mailing an offer to the same person over the course of several months.
Finally, much has been written about privacy and the rise of junk e-mail ("spam"). Issuers' more-or-less total dependence on paper junk mail for new accounts can't last much longer. Even if they do so almost exclusively through co-brand partners, issuers will expand their use of e-mail solicitations dramatically in the next few years.
These e-mails should eventually transform a lengthy form that handles all comers into something approaching a personalized pitch that uses information the issuer already knows about the applicant.
We also expect to see a much more interactive back-and-forth process to determine which card (or rates and terms) will fit a given applicant. Today option proliferation is an established fact, yet the selection processes on issuer Web sites are dull. Applicants can read all they want, but there's precious little dialogue between applicant and issuer once the process starts. The key is flexible applications workflows that will change as the applicant reveals their situation.
Look for an online application is your e-mail inbox real soon. Fill it out and see what happens!
