Instant prescreen—the process of pre-approving consumers for a credit product and presenting a product offer in realtime—has long been a staple of the traditional banking cross-sell approach. Picture a consumer opening a checking account in a bank branch and being presented with a pre-approved credit card offer. While this traditional sales scenario produces great results (a 20–30% acceptance rate), it is hardly the only scenario in which instant prescreen adds value.
Recently Zoot has seen an increase in the number of lenders using instant prescreen to help them do a better job selling auto loans. The idea is very similar to how instant prescreen is being used in the retail credit card space. Lenders work with dealerships because they want to book profitable auto loans. Auto dealerships work with lenders because they want to create the most convenient, frictionless shopping experience possible. They don’t want anything to get in the way of consumers buying the car, including the financing.
Instant prescreen can be an incredibly powerful tool in this scenario, helping lenders and dealerships both meet their goals. For lenders, one of the biggest concerns they have is risk management. They want to book loans, but only with profitable, low risk consumers. This can come into conflict with the dealership’s desire to approve loans and sell cars to every consumer who walks on to their lot.
To reduce the tension between these conflicting objectives, lenders need the ability to make accurate risk decisions based on a 360 degree view of the consumer. There are a number of new data sources that enable lenders to make more accurate risk decisions. One such data source, which is available to be used in prescreen and consumer-initiated credit decisions, has consistently provided lenders a 15% lift in their risk decisions. That’s 15% more consumers who can be approved for auto loans without increasing a lender’s risk level. By incorporating additional data and more sophisticated risk models into the instant prescreen process; lenders can present more pre-approved offers (enabling their dealerships to sell more cars), while maintaining their risk standards.
For auto dealerships, the challenge is creating a better shopping experience for their customers. To illustrate how instant prescreen is being used by industry leaders to transform the automobile shopping experience, allow me to present a use case.
A consumer shows up at your car dealership. They are interested in, but not in desperate need of, a new car. They walk around the lot, checking out the different options with one of your salespeople. They find a car that they are interested in and the salesperson convinces them to take it for a test drive. The consumer gives the salesperson their driver’s license and the salesperson scans it into your system via an app on their iPad. While the consumer is taking their test drive, your lending partner conducts an instant prescreen decision for an auto loan based on the identifying information on the consumer’s driver’s license. After the consumer returns from the test drive, the salesperson takes them into the office to talk through the details. Before the consumer can even ask about financing, the salesperson presents them with a pre-approved auto loan and explains the terms and features of the loan to the consumer on the iPad. The consumer accepts the offer, inputs some additional information on the iPad, and signs on the virtual dotted line with their finger. The loan is instantly booked and the consumer drives off the lot in their brand new car.
Leaders in the auto lending space are embracing the advantages of instant prescreen. Through it, they are driving more profitable loan portfolios, more effective sales engagements, and more satisfying customer experiences.