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© Deluxe Financial Services, LLC. Proprietary and Confidential.
Prescreening is the process of using credit bureau data to select individuals for an offer – usually via direct mail
2
Copy Language associated with Prescreening:
• “Pre-Approved”• “Pre-Qualified”• “Pre-selected”
© Deluxe Financial Services, LLC. Proprietary and Confidential.
Prescreening is defined in the Fair Credit and Reporting Act (FCRA)
3
Fair Credit Reporting Act 603 (l):
“The term ‘firm offer of credit or insurance’ means any offer of credit or insurance to a consumer that will be honored if the consumer is determined, based on
information in a consumer report on the consumer, to meet the specific criteria used to select the consumer for the offer….”
Notes:• “Prescreening” is the process that is used to generate “firm offers of credit” The two terms are often used
interchangeably • There are a series of conditions that apply – but the basic rules are that a lender can use credit for
marketing, then can check to make sure the applicant still meets the criteria when they respond
• The marketing stage cuts can be stricter than the application stage criteria
Another way to think about prescreening: a lender can never decline a responder for something they could have know at marketing-stage
© Deluxe Financial Services, LLC. Proprietary and Confidential.
In 2017, marketers sent out 6.5B prescreen offers – down 145mm, or 2.2%, from 2016
4
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Card PersonalLoan
Insurance Mortgage Auto Student Home Equity
2016 2017
6.7 6.5
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
Prescreen
2016 2017
-25%
+29%
+8%+12%
-22%+33% -34%
-2%
2017 Prescreen Mail Volume(in billions)
Source: Mintel Comperemedia
© Deluxe Financial Services, LLC. Proprietary and Confidential.
Card was down 25% YoY, led by the big issuers
5
2016 Chase AmericanExpress
Capital One Citi All OtherDeclines
(90)
Ollo TD Celtic BBVA All OtherGrowth (63)
2017
3,271
-352
-169
-145
-117
-161
+25+13 +9 +8 +59
2,441
Change in Card Prescreen Pieces Mailed, 2016 to 2017(in millions)
Source: Mintel Comperemedia
© Deluxe Financial Services, LLC. Proprietary and Confidential.
The Top 10 Card Prescreen mailers accounted for 87% of the 2017 volume
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Card Prescreen Pieces Mailed by Issuer, 2017(in millions)
519
373 361
304
181 132 131
50 35 33
323
-
100
200
300
400
500
600
Citibank Capital One Discover AmericanExpress
Bank ofAmerica
Barclays Credit OneBank
SynchronyBank
U.S. Bank TD BankFinancial
Group
All Others(96)
Source: Mintel Comperemedia
© Deluxe Financial Services, LLC. Proprietary and Confidential.
Personal Loans was up 29% YoY, with the growth led by Marcus
7
Calend
ar 20
16
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ans
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3)
Calend
ar 20
17
Change in Personal Loan Prescreen Pieces Mailed, 2016 to 2017(in millions)
-74-23
-17 -10 -9 -9 -88+20 +20 +21 +23 +24 +27 +39
+47+65
+70+72
+144
1,836
2,361+181
Source: Mintel Comperemedia
© Deluxe Financial Services, LLC. Proprietary and Confidential.
The Top 10 Personal Loan Prescreen mailers accounted for 72% of the 2017 volume
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Personal Loan Prescreen Pieces Mailed by Lender, 2017(in millions)
358
234 222 208 178
145 126 84 74 74
659
-
100
200
300
400
500
600
700
LendingClub OneMainFinancial
Prosper Best Egg GoldmanSachs
SoFi Big PictureLoans
Discover CitizensBank
Barclays All Others(96)
Source: Mintel Comperemedia
© Deluxe Financial Services, LLC. Proprietary and Confidential.
Lending Club has grown using heavy direct mail – and their openness gives us a glimpse into their economics
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• 2016 Marketing Spend (1): $216mm
• 2016 Direct Mail Volume (2): 359mm pieces
• Estimated Cost per Piece (3): $0.40
• Estimated spend on Direct Mail: $144mm
• % of Marketing Spend on Direct Mail: 66%
• 2016 Vintage Results (4): 434k Accounts
• 2016 Vintage DM Results (5): 217k Accounts
• 2016 Originations via DM: $3.2B
• DM Cost per Account: $664
• Implied DM Net Resp Rate: 6bp
$0
$50
$100
$150
$200
$250
2016 Marketing Estimated 2016 DMSpend
Other Marketing
$216 $144
$72
2016 Marketing Spend (mm)
(1) 2016 10K(2) Comperemedia(3) Datamyx Assumptions(4) Https://www.lendingclub.com/info/download-data.action(5) Assume DM CPA = 2 * Other CPA
© Deluxe Financial Services, LLC. Proprietary and Confidential.
Deluxe Performance Marketing offers a pricing model that puts the marketing risk on us and can allow amortization
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Bears Marketing Risk
Typical Channels
Typical Accounting Treatment
Cost-per-Impression(aka: CPM)
Lender Direct Mail, Display, Mobile
Expense Marketing Costs
Cost-per-Action(aka: P4P) Supplier
Search Engine Marketing,
Affiliate
Amortize Marketing Costs
© Deluxe Financial Services, LLC. Proprietary and Confidential.
Our approach is to start small and expand with results
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Risk
Resp
Low
High
Low High
Risk Fails
Response Fails
Core (Pilot)
Expansion
We start with Pilot:
• We will design, execute, and fund a small campaign to gather empirical results
• Bounties are a function of credit criteria and product specifics – can range from $100 - $750 for personal loans
Personal Loan Prospect Universe