Abstract:
A method, system, and computer program product for providing credit services is provided. The method includes establishing a first and second minimum levels of eligibility for a first and second set of financing options, respectively. The second set of financing options includes additional credit offer terms for mitigating risk. In response to receiving a request for a financing arrangement that includes the first set of financing options, the method includes performing an eligibility determination for a requester to ascertain which of the minimum levels of eligibility, if any, applies to the requester, and providing a response to the requester based upon results of the eligibility determination. The response includes one of: approving the request for the financing arrangement that includes the first set of financing options, offering the requester other financing arrangement that includes the second set of financing options, and declining the request.

Description:
BACKGROUND  
       [0001]     The present disclosure relates generally to credit services, and in particular, to a method, system, and computer program product for providing credit services.  
         [0002]     Merchants offer their customers financing, provided by a financial institution (“bank”) primarily to make a large dollar purchase more attractive by allowing the customer to either pay over time with a relatively low interest or by paying over time with deferred interest for a specified period of time. Offering financing can attract more customers and convert more customers into a buying decision. The financing vehicle is typically a revolving account with a set maximum credit line but can include closed end secured and non-secured loans.  
         [0003]     Private label financing has varying approval rates for customer financing, mostly depending on the demographics, or creditworthiness, the retailer attracts. In retail, while having as high of an approval rate as possible to maximize sales is desired, application declines are understood as part of doing business. Simply put, retailers desire the highest approval rate with the highest credit line assignments possible.  
         [0004]     Having offered financing as an option, retailers simply do not want to deliver the bad news of a decline. This is especially true in the healthcare market. Because of the special doctor-customer relationship healthcare providers especially fear an application for a patient, their customer, will be declined. This fear causes the merchants to limit offering all of their patients the advantage of the financing option. As a result of this fear, they often only offer financing to their customers as a last resort. Because they are offering financing to those customers as a last resort, perhaps to those who have no other way to pay, and as a result have, on average, a lower creditworthiness score, the odds of having a declined credit application is made higher. This fear, resulting in offering only as a last resort, runs in the face of the very reason why a merchant would offer financing in the first place (i.e., to attract and convert more customers into a buying decision).  
         [0005]     The lender typically sets credit approval criteria, or cutoffs, down to where on average the lowest credit score it approves will not be profitable (where the average losses of that credit score create no profit). An approval under the cutoff would mean on average net losses. The lender can use various risk mitigants to improve losses, such as custom credit scoring models and various promotional terms. But there is a limit to the percentage of applications that can be approved, especially with unsecured revolving credit. Typical approval rates vary dramatically depending on industry and the demographics of customer attracted to the business in that industry.  
         [0006]     A customer who is approved for credit may on occasion fail to manage or fail to remit monthly payments. This causes late fees and finance fees to be charged to the customer by the lender and may also cause negative reporting to the credit bureau.  
         [0007]     Credit line assignment models, used by lenders, are also used to limit risk exposure where, even if approved, the riskier approved applications may be assigned a lower credit line. This creates a problem for the customer and the merchant if the credit line is not high enough to cover the treatment cost and can result in the customer declining the service or product, and perhaps shopping elsewhere.  
         [0008]     Without the use of credit, many customers will not accept the product or service. This is especially true in healthcare where a patient may be recommended a higher cost, non-insured treatment they did not expect.  
         [0009]     Various solutions have been developed in an attempt to overcome the disadvantages laid out above, however, none have been successful. What is needed, therefore, is a way to provide the ability to offer financing to the greatest number of borrowers while minimizing the level of risk of losses associated with financing plans.  
       BRIEF SUMMARY  
       [0010]     A method, system, and computer program product for providing credit services is provided. The method includes establishing first and second minimum levels of eligibility for a first and second set of financing options, respectively. The second set of financing options includes terms for mitigating risk. In response to receiving a request for a financing arrangement that includes the first set of financing options, the method includes performing an eligibility determination for a requester to ascertain which of the minimum levels of eligibility, if any, applies to the requester, and providing a response to the requester based upon results of the eligibility determination. The response includes one of: approving the request for the financing arrangement that includes the first set of financing options, offering the requester other financing arrangement that includes the second set of financing options, and declining the request.  
         [0011]     The system for providing credit services includes a host system in communication with at least one provider entity over a network and a credit application executing on the host system. The credit application performs a method. The method includes establishing a first minimum level of eligibility for a first set of financing options. The method also includes establishing a second minimum level of eligibility for a second set of financing options, the second minimum level of eligibility correlated to a risk that is higher than that of the first minimum level of eligibility. The second set of financing options includes terms for mitigating risk.  
         [0012]     In response to receiving a request from the at least one provider entity for a financing arrangement that includes the first set of financing options, the method includes performing an eligibility determination for a requester to ascertain which of the minimum levels of eligibility, if any, applies to the requester and providing a response to the requester via the at least one provider entity based upon results of the eligibility determination. The response includes one of: approving the request for the financing arrangement that includes the first set of financing options, offering the requester other financing arrangement that includes the second set of financing options, and declining the request.  
         [0013]     The computer program product for providing credit services includes instructions for executing a method. The method includes establishing first and second minimum levels of eligibility for a first and second set of financing options, respectively. The second set of financing options includes terms for mitigating risk. In response to receiving a request for a financing arrangement that includes the first set of financing options, the method includes performing an eligibility determination for a requester to ascertain which of the minimum levels of eligibility, if any, applies to the requester, and providing a response to the requester based upon results of the eligibility determination. The response includes one of: approving the request for the financing arrangement that includes the first set of financing options, offering the requester other financing arrangement that includes the second set of financing options, and declining the request. 
     
    
     BRIEF DESCRIPTION OF THE DRAWINGS  
       [0014]     Referring to the exemplary drawings wherein like elements are numbered alike in the accompanying FIGURES:  
         [0015]      FIG. 1  is a block diagram of a system upon which the credit services may be implemented in exemplary embodiments;  
         [0016]      FIG. 2  is a flow diagram describing a process for implementing the credit services in exemplary embodiments; and  
         [0017]      FIG. 3  is a user interface screen as seen by a provider for use in implementing the credit services in exemplary embodiments. 
     
    
     DETAILED DESCRIPTION OF EXEMPLARY EMBODIMENTS  
       [0018]     In accordance with exemplary embodiments, credit services are provided for facilitating financing plans between customers of merchant provider entities and various lending institutions. The credit services enable merchant provider entities to extend financing options to a greatest possible number of qualified customers who desire to purchase high cost goods and/or services from the merchant providers. The credit services also provide a multi-level screening process in order to qualify the greatest number of customers for financing while safeguarding against losses resulting from financing arrangements that are determined to be at high risk. If qualified at the first level screening, the customer is immediately notified and approved for a financing plan that is designed for low risk customers. The second level screening, if implemented, may occur unbeknownst to the customers, thereby avoiding any embarrassment or discomfort otherwise associated with delivering unfavorable screening results. If qualified at the second level screening, the customer is offered a financing arrangement, the terms of which are designed to compensate for any increase in the credit risk identified for the customer. Possible methods to compensate for the increase in risk include, but are not limited to, one or more of, requiring a down payment from the customer, requiring the customer to allow for automatic monthly withdrawal from their checking account for repayment, either via electronic funds transfer (EFT) or automatic generation of monthly drafts through means other than EFT, promotional terms that require faster payoff of total amount financed, higher merchant discount, and higher fees or finance charged to the customer. The credit services further provide the ability to set up and execute the financing plans, including notifying the lending and borrower institutions of the financing plan.  
         [0019]     Turning now to  FIG. 1 , a system upon which the credit services may be implemented in accordance with exemplary embodiments will now be described. The system of  FIG. 1  includes a host system  102  executing computer instructions for providing credit services. The host system  102  is in communication with provider entities  104  over a network  106 . The host system  102  may be an enterprise that offers credit management services to various provider entities under an agreement. For example, host system  102  may be an application service provider (ASP) or other third-party entity that offers these services. A merchant provider entity (provider entity) refers to an entity that provides products and/or services to customers (also referred to as “borrowers” and “requesters”) for a fee. The provider entity may be a retail establishment, a network-based vendor, a medical establishment, or any other suitable enterprise that offers products and/or services.  
         [0020]     The provider entities  104  may include one or more computer systems through which users at one or more geographic locations may contact the host system  102 . Each provider entity  104  may be implemented using a general-purpose computer executing a computer program for carrying out the processes described herein. The provider entities  104  may be personal computers (e.g., a lap top, a personal digital assistant) or host attached terminals. If the provider entities  104  are personal computers, the processing described herein may be shared by the provider entities  104  and the host system  102  (e.g., by providing an applet to the provider entities  104 ). The provider entities  104  store account records  120  for their respective customers which may be used to track customer expenditures, historical records of financing activities, and other relevant information.  
         [0021]     The network  106  may be any type of known network including, but not limited to, a wide area network (WAN), a local area network (LAN), a global network (e.g. Internet), a virtual private network (VPN), and an intranet. The network  106  may be implemented using a wireless network or any kind of physical network implementation known in the art. A provider entity  104  may be coupled to the host system  102  through multiple networks (e.g., intranet and Internet) so that not all provider entities  104  are coupled to the host system  102  through the same network. One or more of the provider entities  104  and the host system  102  may be connected to the network  106  in a wireless fashion. In one embodiment, the network  106  is an intranet and one or more provider entities  104  execute a user interface application (e.g. a web browser) to contact the host system  102  through the network  106 . In another exemplary embodiment, the provider entity  104  is connected directly (i.e., not through the network  106 ) to the host system  102  and the host system  102  is connected directly to or contains a storage device  114 .  
         [0022]     The storage device  114  includes data relating to provider entities serviced by the host system  102  and may be implemented using a variety of devices for storing electronic information. It is understood that the storage device  114  may be implemented using memory contained in the host system  102  or it may be a separate physical device as shown in  FIG. 1 . The storage device  114  is logically addressable as a consolidated data source across a distributed environment that includes a network  106 . Information stored in the storage device  114  may be retrieved and manipulated via the host system  102  and/or via the provider entities  104 . A data repository containing provider records or accounts is located on the storage device  114 .  
         [0023]     In exemplary embodiments, the host system  102  operates as a database server and coordinates access to application data including data stored on the storage device  114 .  
         [0024]     The host system  102  communicates with network entities, such as credit reporting sources  108 , lender financial institutions  110 , and borrower financial institutions  112 , in addition to the provider entities  104 , over network  106 . Credit reporting sources  108  provide details of a customer&#39;s financial history, such as previous and outstanding debts to other creditors, ability to repay debt as evidenced by demonstrated continuity of payments to creditors (e.g., lack of credit default activities), and other information that provides insight as to the customer&#39;s potential risk. Credit reporting sources  108  may include credit bureaus or agencies. The credit application  116  communicates with the credit reporting sources  108  as described further herein.  
         [0025]     Financial institutions  10  and  112  may include banks, credit unions, or other enterprise that provides financial resources to its customers. Lender financial institutions  110  provide financing to customers of the provider entities  104  as described further herein. Borrower financial institutions  112  refer to institutions that provide account services to customers of provider entities  104 , such as checking, savings, debit, credit, and other services. In exemplary embodiments, the customers of providing entities  104  hold accounts with one or more of borrower financial institutions  112  that, in turn, provides electronic funds transfer (EFT) services for its customers. The borrower financial institutions  112  may also provide to the host system  102  information regarding the customers&#39; accounts (also referred to as requesters&#39; accounts) including status of account, e.g., account open or closed, account had a positive balance, account has outstanding drafts with insufficient funds.  
         [0026]     The host system  102  depicted in  FIG. 1  may be implemented using one or more servers operating in response to a computer program stored in a storage medium accessible by the server. The host system  102  may operate as a network server (e.g., a web server) to communicate with the network entities. The host system  102  handles sending and receiving information to and from the network entities and can perform associated tasks. The host system  102  may also include a firewall to prevent unauthorized access to the host system  102  and enforce any limitations on authorized access. For instance, an administrator may have access to the entire system and have authority to modify portions of the system. A firewall may be implemented using conventional hardware and/or software as is known in the art.  
         [0027]     The host system  102  may also operate as an application server. The host system  102  executes one or more computer programs (e.g., credit application  116 ) to provide credit services to provider entities  104  and its customers. The credit application  116  may further include a user interface  118  that is accessible to the provider entities  104  as described further herein. Processing may be shared by the provider entities  104  and the host system  102  by providing an application (e.g., java applet) to the provider entities  104 . Alternatively, the provider entities  104  may include stand-alone software applications for performing a portion or all of the processing described herein. Alternatively, customers may interface directly into the host system  102  through their own computer system (not shown), or other device, submitting the credit application directly and receiving the approval response directly. As previously described, it is understood that separate servers may be utilized to implement the network server functions and the application server functions. Alternatively, the network server, the firewall, and the application server may be implemented by a single server executing computer programs to perform the requisite functions.  
         [0028]     As described above, the credit services include a multi-level screening process for evaluating credit worthiness of customers and determining suitable financing options to offer customers. The credit application  116  is configured such that a first level of screening is performed before a determination is made whether to proceed with a second level of screening. This may be accomplished by establishing a minimum level of eligibility for determining low risk customers. This minimum level of eligibility is associated with a defined set of financing options. For example, a low risk customer may be offered a set of financing options that includes one or more of: no interest financing, low interest financing, extended payment plan, an installment plan, a revolving line of credit, no down payment, etc. The minimum level of eligibility may be determined based upon, e.g., a customer&#39;s credit score as determined by a credit bureau or other entity, demographic information of the provider entity location (e.g., level of financial risk known for a population served by the provider entity or surrounding area), the cost of the product or service for which financing is requested, and/or other suitable criteria.  
         [0029]     A second minimum level of eligibility may then be established and associated with a second set of financing options. For example, a customer who does not qualify for first level of financing options, but who qualifies under the second minimum level of eligibility may be offered financing options that include, one or more of: a minimum down payment, a limited term payment plan, an interest rate higher than that of the first financing plan (e.g., an interest rate set in order to mitigate the higher risk), required automatic EFT payments from the customer&#39;s account (i.e., provided through the borrower financial institution  112 ), and a payment plan that requires payments to be made by automatic generation of monthly drafts through means other than EFT. The combination of these additional options, associated with second level of financing, allows for a dramatically higher percentage of approved applications.  
         [0030]     While the second set of financing options may offer terms that are somewhat more restrictive than those offered for what are considered to be ‘lower risk’ customers, the second set of financing options may be designed to provide terms that are more attractive to customers than those offered under traditional subprime programs. For example, the provider entities  104  may be charged a higher discount fee than what is typically charged under existing lending programs. This higher discount fee provides some mitigation to anticipated risks associated with providing financing to higher risk customers. Though incurring a greater discount fee, merchants are relieved of the trepidation or concerns associated with delivering news of rejection to their valued customers. With this fear eliminated or minimized, the merchants may be more inclined to extend financing offers to more of their customers, which in turn, may lead to more customers applying for financing (including more low risk customers), ultimately resulting in the potential for more generated business for both the merchants (provider entities) and lender financing institutions.  
         [0031]     While only two levels of eligibility are described, it will be understood that any number of additional levels of eligibility may be established in order to realize the advantages of the exemplary embodiments. For example, a second level may require 10% down payment and EFT payments and a third level of eligibility may require a 20% down payment, 12 month repayment, and a 10% merchant discount fee. Once the levels of eligibility are established and associated with levels of financing options, requests for financing through the credit application  116  may be implemented.  
         [0032]     Turning now to  FIG. 2 , a process for implementing the credit services will now be described in accordance with exemplary embodiments. The process begins at step  202  when a borrower initiates a request for a first set of financing options. The request includes identification information of the borrower (e.g., name, social security number, date of birth, etc.) as well as the requested amount to be financed. The request is received by the host system  102  at step  204 . The credit application  116  initiates a first level screening for the borrower at step  206 . The first level screening is performed in order to determine whether the borrower meets the minimum level criteria established in order to be eligible to receive the first set of financing options. The screening may include assessing the borrower&#39;s credit worthiness based upon, e.g., a credit scoring system, or other suitable means of determining credit worthiness. Credit worthiness determinations may also factor in criteria that is not specific to the borrower but is generally relevant or useful in supplementing the credit worthiness evaluation. For example, demographic information associated with a provider entity may be considered (e.g., provider entity is located in a geographic location that has a high percentage of population at or near the poverty level).  
         [0033]     At step  208 , it is determined whether the borrower meets the minimum level criteria for the first set of financing options. If so, the credit application  116  sends an approval notice to the provider entity  104  associated with the borrower, along with the specific terms of the first level financing at step  210 .  
         [0034]     If, on the other hand, the borrower does not meet the minimum level criteria for the first set of financing options, the credit application  116  automatically initiates a second level screening for the borrower at step  212 . This second level of screening may be unbeknownst to the borrower. The second level screening is performed in order to determine whether the borrower meets the minimum level criteria established in order to be eligible to receive the second set of financing options. The screening may include assessing the borrower&#39;s credit worthiness based upon, e.g., a credit scoring system, or other suitable means of determining credit worthiness. Credit worthiness determinations may also factor in criteria that is not specific to the borrower but is generally relevant or useful in supplementing the credit worthiness evaluation.  
         [0035]     At step  214 , it is determined whether the borrower meets the minimum level criteria for the second set of financing options. The minimum level criteria for the second set of financing options may be established at a threshold that ensures a high rate of approval. For example, the minimum level criteria for the second set of financing options may require that the borrower information exists in a data repository searched by a credit reporting source (e.g., credit bureau), the borrower information reflects that the borrower is not deceased, and that the borrower has not applied for bankruptcy protection. Other criteria that may be considered include, e.g., credit bureau scores, costs of the product or service for which financing is requested, and demographic information. If the borrower does not meet the second level criteria, the credit application  116  issues a notice of denial for the request at step  216 , and the process ends at step  218 .  
         [0036]     However, if the borrower does meet the second level criteria at step  214 , the credit application  116  generates an offer for the second set of financing options and extends the offer to the borrower through the provider entity  104  at step  220 . At step  222 , it is determined whether the borrower has accepted the offer. If not, the process ends at step  218 . Otherwise, the credit application  116  prompts the provider entity  104  to enter borrower information via a set-up form provided by the credit application  116  at step  224 . The set-up form may be accessed by the provider entity via the user interface  118  of the credit application  116 . A sample user interface screen  300  is shown in  FIG. 3 .  
         [0037]     Turning back to step  210 , if the borrower is approved for the first set of financing options, the provider entity  104  notifies financial institution  110  of the transaction amount and promotional terms, through, e.g., a phone system, networked terminal, or other established network interface and the process continues at step  230 .  
         [0038]     Turning back to step  220 , if the borrower accepts the terms of the offer for second set of financing options, the provider entity  104  provides the financial institutions  110 ,  112  with the necessary information to complete the process. As shown in  FIG. 3 , the user interface screen  300  enables a provider entity  104  to enter information (e.g., set up process) for a customer who has been approved and has accepted a financing plan. The user interface screen  300  includes a box  302  for providing customer (borrower) information, such as the borrower&#39;s name. The box  302  also includes a field that specifies the borrower account number that is uniquely assigned by the credit application  116 . A financial information block  304  is also provided in the user interface screen  300 . The provider entity  104  enters information relating to the borrower financial institution  112  and information relating to the borrower&#39;s account with the financial institution  112 . This information enables automatic EFT payments to be made from the customer&#39;s account with the institution  112  to the lender financial institution  110  that is providing the financing.  
         [0039]     At step  226 , the provider entity  104  validates the set-up information. This step may include, e.g., ensuring that customer&#39;s account with the borrower financial institution  112  exists, that adequate funds exist in the borrower&#39;s account to cover the required down payment, that outstanding drafts with insufficient funds on the account do not exist, and that the information entered during set up is correct. At step  228 , the provider entity  104  notifies the lending institutions and/or borrowing institutions of the financing agreement. The notification may be generated by the credit application  116  and transmitted to the institutions  110 ,  112 . The transaction is processed (e.g., EFT funds initiated) and posted at step  230  and the process ends at step  218 .  
         [0040]     As described above, the embodiments of the invention may be embodied in the form of computer-implemented processes and apparatuses for practicing those processes. Embodiments of the invention may also be embodied in the form of computer program code containing instructions embodied in tangible media, such as floppy diskettes, CD-ROMs, hard drives, or any other computer-readable storage medium, wherein, when the computer program code is loaded into and executed by a computer, the computer becomes an apparatus for practicing the invention. The present invention can also be embodied in the form of computer program code, for example, whether stored in a storage medium, loaded into and/or executed by a computer, or transmitted over some transmission medium, such as over electrical wiring or cabling, through fiber optics, or via electromagnetic radiation, wherein, when the computer program code is loaded into and executed by a computer, the computer becomes an apparatus for practicing the invention. When implemented on a general-purpose microprocessor, the computer program code segments configure the microprocessor to create specific logic circuits. The technical effect of the executable code is to provide credit services to customers of provider entities.  
         [0041]     While the invention has been described with reference to exemplary embodiments, it will be understood by those skilled in the art that various changes may be made and equivalents may be substituted for elements thereof without departing from the scope of the invention. In addition, many modifications may be made to adapt a particular situation or material to the teachings of the invention without departing from the essential scope thereof. Therefore, it is intended that the invention not be limited to the particular embodiment disclosed as the best or only mode contemplated for carrying out this invention, but that the invention will include all embodiments falling within the scope of the appended claims. Moreover, the use of the terms first, second, etc. do not denote any order or importance, but rather the terms first, second, etc. are used to distinguish one element from another. Furthermore, the use of the terms a, an, etc. do not denote a limitation of quantity, but rather denote the presence of at least one of the referenced item.