CUNA Technology Council Awards Member Service/Convenience. Preapproval Project

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1 1 CUNA Technology Council Awards Member Service/Convenience Preapproval Project The Challenge Oregon Community Credit Union (OCCU) has a $51M Credit Card Portfolio, yet to date had not been offering preapprovals as a card acquisition strategy one of the most common and critical acquisition strategies in the marketplace. Not only was OCCU not offering its base membership preapproval offers, but it was also missing out on offering preapprovals to a steady stream of Indirect Vehicle Loan members, which can sometimes reach 1K new members per month. In building the business requirements for the preapprovals system, OCCU wanted to ensure they built the capacity to regularly offer preapprovals to existing members as well as newly enrolled members, that the system would be automated (requiring as little human intervention as possible), that the system would scale to include additional products in the future, and that the system would provide a simple and exceptional Member Experience (MX). OCCU scanned the marketplace for potential solutions, including looking at capabilities potentially available through its MeridianLink loan origination system, LoansPQ (LPQ). However, it was clear there wasn t a solution in the marketplace that would fulfill OCCU s business requirements, specifically the Member Experience requirement to not require a full application when a member accepts the preapproved offer. The technology challenge, therefore, was to create a solution that would balance Member Experience, Credit Risk, System Integration and Automation while placing member service and convenience at the forefront. Preapproval Project The OCCU Preapproval Project Team framed the project with strategy checkpoints for System Architecture, User Interface (UI), Data Integration and Automation, while checking those strategies against the customer journey map and minimum viable product commitments. Leading into the system architecture phase, the first order of business was to build a custom data base and decision engine, development and programming of underwriting criteria, mapping and design of system integrations, ensuring compliance with regulations and guidelines, the design, development and distribution of the member-facing experience, and new Adobe Campaign workflows (direct mail, trigger s). This required coordination across the Credit Union, including facilitation from the Enterprise Project Management Office (EPMO) and strong collaboration among Marketing, Technology, Business Intelligence, Systems Operations, Enterprise Risk & Administration, and Lending.

2 2 Architect Framework Starting with a custom database, OCCU then developed a decision engine and incorporated automated workflows. This program culls relevant data from various OCCU databases, evaluates data for each prospective cardholder against underwriting criteria, and produces a list of preapproved members. It then sends the preapproval list to Adobe Campaign, which is the tool the Marketing Team uses to facilitate the delivery of the preapproval offers to members. See framework diagram below. This project was an early deployment on our new integration platform. The custom-built Enterprise Service Bus, or ESB, aligns to service-oriented architecture and CUFX standards. We integrate with 3 rd party services such as MeridianLink and Equifax using standard APIs. (See Next Page for Architecture Diagram)

3 Architect Framework Diagram 3

4 4 UX Framework After collecting the preapproval list from the system, Adobe Campaign generates automated and direct mail offers to members on a preset schedule. The offer uses a PURL, meaning the member receiving the offer via can accept the offer by completing a three-field form to verify their information, then three clicks to choose their credit card, accept terms and conditions and accept the offer. A shortcut URL is utilized in the direct mail campaign, leading the member to a similar landing page where they are prompted to enter their identifying information. The page then returns their validated offer and they re three clicks away from accepting as well. Further, Adobe Campaign validates against the preapproval system that the preapproval is still open before sending subsequent offers. See UX workflow sample below. UX Framework Diagram

5 5 The Implementation The first offers were delivered to OCCU members via the week of July 3 to approximately 500 recipients and the week of July 17 to approximately 11,100 recipients. The first direct mail pieces were mailed the week of July 17. Prospects are sourced from LPQ weekly and from our Consumer Portfolio Review (CPR) file quarterly. On an ongoing basis, a drip campaign presents offers to the LPQ segment weekly; the CPR file prospects will be picked up by that same process once quarterly. Stop-gaps are in place to ensure members receive offers only up to twice per year. On-file credit and income data is utilized to determine APR and credit lines for recent loan applicants (organic and in-organic) and OCCU acquires necessary loan decisioning and Reg-Z compliant income and debt-to-income attributes from a credit reporting agency to determine other qualified prospects from amongst current member files. The solicitation pieces include the recipient s preapproved line and APR in an effort to be more compelling. The recipient can click-through their to a personalized landing page or use a shortcut URL to a non-personalized landing page. The member then is asked to select the card they want (we offer two choices), verify their identity by entering three pieces of information (last name, last four of SSN, and DOB), and two clicks later their card is on the way. All in four clicks (click through , select card, accept terms and conditions, accept card). There is also an internal webpage staff can use to assist a member who wishes to accept a preapproval offer it requires the same three pieces of verifying identification and one click. The rest of the fulfillment process is fully automated, not requiring any further human intervention. (See samples of the Member-facing Experience on next pages).

6 Preapproval offer 6

7 Preapproval offer landing page: 7

8 8 Preapproval offer accepted confirmation webpage: The Financials and Outcomes For this first Preapproval Campaign, OCCU set a target of 400 new credit card accounts by the end of 2017, which is a conversion rate of 1.00% from a total prospect pool of approximately 40,000. Our first phase of s alone achieved an open rate of 48.7%, with a click-through rate of 2.03% (Please note that OCCU gages success or need for improvement based on industry averages of a 19.5% open rate and a 1.3% clickthrough rate). Through August 13, 2017, we already have had 226 cards accepted from the Preapproval Project for $2,417,500 in credit lines, which represents $10,697 per card compared to our portfolio average of $7,812 as of Q1 dashboard and an acceptance rate of 1.38%. Based on credit criteria, the credit quality is skewed toward high FICO scores, which will display higher spend. Portfolio figures below come from March data derived from Q1 TSYS Review. TSYS is OCCU s credit card processor. Purchases: 720+ FICO bands typically average approximately $607 in purchases. Based on credit distribution, we estimate preapproved cards will perform similarly.

9 9 Balances: 720+ FICO cards have average balance per card of $2,393, so we estimate 475 cards will have balances totaling $1,136,912. This will help us achieve our 2017 goal of 12% balance growth overall across Portfolios. Finance Charge: 720+ have average finance charges of $9.39, so we estimate 475 cards will generate $4,460 per month in finance charges. Interchange: March interchange was $120,232 based on 15,121 active cards, $7.96 per active. With 720+ FICO cards spending 130% of average amounts, we estimate is that 475 cards will each generate $10.35 or $4,916 per month. Contributions to the Success of the Credit Union The Preapproval Project laid the foundation for success for the Credit Union through positively impacting OCCU s credit card portfolio, building a foundation to scale, condensing the conversation funnel and automation. Credit card portfolio As indicated in the section above, implementation of the preapproval system allows for an effective cross-sell to OCCU s existing membership. In additional to the acceptance rate being on-track, OCCU has garnered exceptional credit quality, 63.71% being tier one credit and as a result garnered higher average credit lines. Foundation to scale The project was scoped on the principles of minimum viable product, meaning that our first release didn t include all the features we d like to offer our members. However, the project team did filter all ideal features through the filter of future development, ensuring that the foundations of the system would allow for easy implementation of the desired future features. Condensing the conversion funnel With the similar preapproval systems in the market, users are required to fill out an entire application to accept the offer. The extra steps for the member to fill out data the Credit Union already has can result in a lower conversion rate because of the lengthy funnel to complete the conversion. This system lays the valuable foundation for shorter conversion funnels and increased conversion rates. Automation Establishing automation as a business requirement pushed the Project Team to develop a sustainable solution. As with any custom development, there will be on-going maintenance, however, the upfront development of automated integrations will allow this solution to be sustainable for the Credit Union to execute on weekly, as well as removing the delay in fulfillment that would be inevitable with human intervention. This is just the beginning. OCCU will now be able to offer preapprovals on an ongoing basis to its membership and all indirect members on a steady basis. Achieving our goals of offering exceptional MX, while also offering a product that serves our members while benefiting the Credit Union, the Preapproval Project is proving to be a significant

10 10 win for Moreover, the work that has gone into this project has set us up to be able to offer preapprovals for other loan products, such as Home Equity Lines and auto loans in the future. # # #