Why a 24-hour Credit Approval Isn’t Fast Enough

Success is no longer just the absence of problems. Sure, customers expect you to have the product they need, have it delivered promptly, have the order be accurately fulfilled, and be billed without error. However, in the world where the internet has set the standard for convenience and speed, saving customers’ time will earn you a competitive advantage – for both your online and offline customers.

This new reality means that businesses must pay particular attention to one of their first points of contact with customers: credit applications. Customers faced with a laborious credit application process that requires printing out a form, sending it in and waiting more than a day to hear back are likely to search for a supplier with a more streamlined process. That means you could be losing customers—even if you provide a 24-hour turnaround on their application. It’s no wonder that according to Credit Today’s recent benchmarking survey on process automation, the highest priority item to automate wasn’t month-end reporting and KPI dashboards, or even credit monitoring. It was automation of the credit application process. [1]


Slow and subjective

Consider the inefficiency involved in manually processing a paper credit application. The customer fills out the form by hand and sends it to the credit department, where someone contacts a credit bureau, checks references and—using criteria that differs from business to business and may not accurately reflect creditworthiness—takes anywhere from a few hours to a few weeks to decide whether to grant the applicant credit, and how much.

This process runs the risk that customers won’t fill out their applications correctly or completely—meaning your staff has to make follow-up calls that further delay the processing and final credit decision. As a result, it takes much longer for customers to actually start clicking the order button.

Fast and standardized

Automated applications streamline the process and improve the experience for both you and your customers. First, customers (or your sales team can do this for your offline customers) fill out an online form that eliminates the chance of incomplete applications. Using criteria proven to predict an applicant’s true risk, each application is evaluated for the likelihood of severe delinquency or charge-offs and placed in the appropriate risk category. Then customers get an instant credit decision with an immediately available credit line. If you have customers that buy online from you today, they can even start purchasing what they need in the same session.

Integrated application decisioning

Image showing integrated application decision engineThe benefits of automated applications and instant credit approvals to the customer are clear: more speed and greater convenience. But the benefits to your business are just as important:

  • More sales. We’ve helped companies achieve an instant credit decision on up to 90% of their online credit applications, allowing for faster approvals and an immediate ability to purchase.
  • Lower costs. Automated processes require less manpower, and that quickly translates into lower costs. Manually processing a few hundred applications a month can require two full-time staff – who could be freed up for higher-value work.
  • Reduced friction between the credit and sales departments. An automated process mean that both credit and sales have access to customer applications, and the decisions are consistent and validated, preventing any delays or biases created by sales pressure. Both teams have worked together to build a credit model that balances risk with new sales growth, and have full visibility into the status of all decisions.
  • Stronger focus on high-risk accounts. With so many inefficiencies eliminated, your credit staff can devote more attention to the minority of accounts that qualify as high risk. When these accounts are properly evaluated, cases of costly delinquency decrease.

The bottom line: Automating your credit application, approval and monitoring systems could make the difference between attracting customers and losing them to your competitors. Not only that, you’ll lower costs, reduce the risk of delinquency and charge-offs, and free your staff to focus on higher value work—ultimately driving more revenue and increasing your bottom line.

Online Credit Application

Written by Sarah Faatz, Director of Credit Risk Management

[1] https://www.credittoday.net/public/Considerations-when-Automating-the-Credit-Application-Process.cfm