Patent Publication Number: US-2012029996-A1

Title: Loyalty-Based Credit Prescreening System

Description:
BACKGROUND OF THE INVENTION 
     1. Field of the Invention 
     The present invention relates to the field of loyalty programs, and in particular to a loyalty-based credit prescreening system. 
     2. Description of the Related Art 
     Many retailers use multiple methods at point of sale (POS) to capture customer information. One is a loyalty program, such as a multi-tender loyalty program; another is a credit program (private label or co-brand). Both tools take resources at the POS to solicit the product and process the application. The retailer must decide where to focus so that customer service is not compromised. While a loyalty program will attract a larger number of customers and provide a greater marketing reach, credit programs typically provide the retailer with a greater financial benefit through reduced merchant fees and marketing incentives. 
     Loyalty and credit each bring unique value to the retailer, and have historically been offered separately. Under the existing model, the retailer must decide where to focus resources so that customer service is not compromised. Further, because retailers dislike selling credit to customers who are then declined when trying to offer a credit account, retailers sometimes stop selling credit altogether. 
     BRIEF SUMMARY OF THE INVENTION 
     In brief, a loyalty-based credit prescreening program allows a retailer to enroll customers in a loyalty program, then solicit only pre-qualified customers for financial instruments at the time of the transaction. 
     In one embodiment, a method comprises (a) receiving a first data corresponding to a customer from a retailer, the first data related to a loyalty account corresponding to the customer, (b) prescreening the customer for credit responsive to the first data; and (c) authorizing the retailer to offer credit to the customer, wherein (a), (b), and (c) are performed as part of a transaction between the customer and the retailer. 
     In another embodiment, a system comprises a first processor, a first storage subsystem, coupled to the first processor, configured to store: a credit prescreening software, which when executed causes the processor to perform actions comprising (a) receiving a first data corresponding to a customer from a retailer, the first data related to a loyalty account corresponding to the customer, (b) prescreening the customer for credit responsive to the first data; and (c) authorizing the retailer to offer credit to the customer, wherein (a), (b), and (c) are performed as part of a transaction between the customer and the retailer. 
     In another embodiment, a method of integrating credit and loyalty programs comprises accepting a transaction data from a retailer POS system for a transaction by a loyalty program member, awarding loyalty rewards to the member responsive to the transaction data, prescreening the member for a financial instrument as part of the transaction, and authorizing the retailer to offer the financial instrument to the member responsive to prescreening the member. 
     In another embodiment, an integrated credit and loyalty system for operating a loyalty program comprises a processor, a storage subsystem, coupled to the processor comprising storage media configured to store a database of loyalty program member information, a software program, which when executed causes the processor to perform actions comprising: enrolling a member in the loyalty program; updating the database of loyalty program member information responsive to a transaction by the member with a retailer; awarding loyalty rewards to the member responsive to the transaction; prescreening the member for a financial instrument; and authorizing the retailer to offer the financial instrument to the member. 
    
    
     
       BRIEF DESCRIPTION OF THE SEVERAL VIEWS OF THE DRAWINGS 
       The accompanying drawings, which are incorporated in and constitute a part of this specification, illustrate an implementation of apparatus and methods consistent with the present invention and, together with the detailed description, serve to explain advantages and principles consistent with the invention. In the drawings, 
         FIG. 1  is a block diagram illustrating the relationships between a retailer and various other systems according to one embodiment; 
         FIG. 2  is a high-level block diagram illustrating one embodiment of an integrated credit and loyalty system; 
         FIG. 3  is a block diagram of the credit prescreening technique according to one embodiment; 
         FIG. 4  is a block diagram illustrating a simplified computer system for performing the credit prescreening technique according to one embodiment; 
         FIG. 5  is a block diagram illustrating a multi-tender loyalty program according to one embodiment; and 
         FIGS. 6A and 6B  are a process flow chart illustrating an integrated credit prescreening and loyalty system according to one embodiment. 
     
    
    
     DETAILED DESCRIPTION OF THE INVENTION 
     A loyalty-based credit prescreening program allows retailers to integrate credit and loyalty offerings to maximize joint benefit. Such a system allows retailers to “lead with loyalty” and up sell to credit. As discussed herein, a “loyalty program” is a database or other system accessible in real time by a retailer point of sale (POS) system that contains customer demographic information. In some, but not all, loyalty programs, a group of parameters and rules govern the application of a reward, typically expressed as points or other similar units, to members for purchases or other non-monetary related activity, together with the computer systems that implement those parameters and rules. A “multi-tender loyalty program” is a loyalty program where a member can earn loyalty rewards for any type of tender used in a transaction, including the use of multiple tender types in a single transaction. A member enrolls in a loyalty program by providing demographic information, such as name, address, etc., and receives a membership or account number or other account identification information for the loyalty program. In some loyalty programs, retailers offer use a “take-one” technique for collecting members, which refers to the retailer having a number of membership cards or materials in the store that can be provided to the member upon request or left in an area for the member to take one at will. 
     There are synergies to be had in using loyalty as a credit catalyst; namely, lessening the resources required of the retailer at POS to solicit the product(s) and process the application. Under the conventional model, the retailer must decide where to focus resources so that customer service is not compromised. In an integrated credit and loyalty system, retailers can lead with loyalty, then once loyalty customers have been established, retailers can separately offer customers credit. An integrated system simplifies the customer experience at the POS, avoiding or lessening the need for multiple product pitches. In addition, no customer will ever be declined access to either loyalty or credit, because loyalty is available to all, and only qualified customers will be solicited for credit. 
     Retailers using an integrated credit and loyalty program can collect customer demographics on behalf of their loyalty program (either at the POS, via take-one, web registration/enrollment or call-in registration/enrollment. Using this demographic data, retailers can pre-qualify their customer base for a credit program. Using this data, only qualified customers are solicited with an offer for a credit product. The system allows for retail prescreen which will allow the credit offer to qualified customers immediately upon receipt of demographics received for the loyalty program. Qualification data can be used to solicit customers for credit products through a variety of mediums, including at Retail POS. The credit offering can be made as pat of a transaction by the customer with the retailer. The integrated credit and loyalty program in some embodiments offers a low-cost multi-tender loyalty program to retailers who cannot afford a fully integrated CRM solution. Multi-tender customer profiles can be compiled for use in driving incentive strategies through rebates and certificates. In other embodiments, a retailer&#39;s existing loyalty program can be used to provide the demographic data for the prescreening. 
     Combining loyalty and credit into a single turnkey offering can alleviate the retailer burden of supporting multiple methods at point of sale to capture customer information. This burden often comes at the expense of the customer, but it can also be resource intensive to the retailer. An integrated system as disclosed herein simplifies the product to the customer and to the service representative, while increasing the efficiency with which offers are made. On the other hand, for retailers who have an existing loyalty program, adding a credit prescreening system can provide similar benefits. As disclosed herein, an integrated credit and loyalty system can be implemented as a single turnkey system from a single service provider, or as separate systems where the loyalty program can be provided by an third party or even by the retailer itself. The integration allows providing demographic data from the loyalty program to the credit prescreening system for use in the prescreening. 
     As stated above, one target market for an integrated credit and loyalty system is the retailer who, for whatever reason, cannot justify the expense of a larger program. One potential advantage to such a retailer is the program&#39;s utility in driving credit program adoption. Other retailer benefits of this integrated approach include maximized access to a wider customer base, ability to focus training efforts on a single process in order to maximize loyalty acquisition, a prescreen process that makes the credit offer a much more positive experience for both the store associate and the customer since only those who are pre-approved are solicited, decreased costs for POS changes, consolidated vendor management (in single provider embodiments, where there is no third party loyalty provider to manage), stronger branding and brand affinity, integrated communication strategies, integrated customer segmentation and resulting marketing strategies and enhanced private label credit card and co-brand value propositions. For embodiments where the retailer uses an integrated POS and a single provider integrated system, development costs that would be separately incurred in the past are now a single project, since loyalty and credit applications are integrated and in some embodiments can be sent to the credit and loyalty program provider through the same connection. Customers also experience benefits from this approach: shorter application times during checkout, minimized risk of dealing with a declined credit application, and more chances to earn rewards. 
       FIG. 1  is a block diagram illustrating the relationship between the retailer and the various other systems in an integrated credit and loyalty system  100 . The retailer interacts with customer  105  through the retailer POS system  110 . The retailer POS system  110  is in communication with loyalty system  120 . Any desirable communication technique can be used for this communication, including TCP/IP over the Internet, possibly involving intermediary systems, not shown in  FIG. 1  for clarity. 
     Similarly the retailer POS communicates with credit system  130 , which performs the credit prescreening. As with the loyalty system  120 , the retailer POS  110  and credit system  130  can use any desirable communication technique. No direct communication is required between the credit system  130  and the loyalty system  120 . The credit system  130  communicates with the credit bureau  140  or other similar source of credit rating information. Although only a single credit bureau  140  is shown in  FIG. 1 , the credit system can be configured to request credit rating data from a plurality of credit rating data sources  140 , which may be credit bureaus or other sources of such information known to the art. In embodiments where credit rating data is obtained from a plurality of credit rating data sources, any desired technique for combing a returned credit rating data can be used. The retailer POS  110  does not need to have a direct link to the credit rating source  140 . 
       FIG. 2  is a high-level flow chart illustrating the basic steps of one embodiment of an integrated credit and loyalty system  100 . In block  200 , the customer  105  initiates a transaction at a retail establishment, typically by approaching a register with goods to purchase. As part of the transaction, the retailer accepts from the customer in block  210  information identifying the customer  105  as a member of the retailer&#39;s loyalty program  120 . In some embodiments, this is done by the customer  105  or the retailer swiping a card through a card reader to provide loyalty membership account data. In other embodiments, the customer  105  may provide a key fob or other item that is bar coded or otherwise marked with account data that can be read by the retailer&#39;s POS system  110 . These techniques are exemplary and illustrative only and other techniques can be used. In block  220 , the retailer POS  110  sends the loyalty account identification over a communications network to the loyalty program system  120 , requesting demographic data for the customer  105 . In block  230 , the retailer sends the demographic data received from its loyalty system  120  from the retailer POS  110  to the credit prescreening system  130  over a communications network, which may be the same or a different network as that used for communicating with the loyalty system  120 . In some embodiments, the loyalty program system  120  can be provided by the provider of the credit prescreening system. In such embodiments, the loyalty system  120  can communicate directly with the credit prescreening system  130 , instead of using the retailer POS  110  as an intermediary. 
     The credit system  130  then, in block  240 , sends at least some of the demographic data, in particular name and address information, to a credit rating resource  140 , such as a credit bureau, asking for a credit score or other credit information corresponding to the customer  105 . Upon receipt in block  250  of the credit rating data, the credit system  130  in block  260  prescreens the customer  105  based on the credit rating data and to decide whether to authorize the retailer to offer credit to the customer  105 . The credit system  130  in block  270  sends the authorization to the retailer POS  110 . The retailer can then in block  280  offer credit to the customer  105  and collect any other necessary information from the customer  105  for opening a credit account and issuing a financial instrument such as a credit card. Finally, in block  290 , the credit system  130  can take the customer information and open a new credit account for the customer  105 , which can be used to pay for the transaction. Generally, a financial instrument, such as a credit card, is then mailed or otherwise delivered to the customer  105 . In some embodiments, information about the credit account can be printed on a receipt for the transaction for use until the delivery of the financial instrument. All of these activities take place while the customer  105  is still at the register, as part of the retail transaction. 
       FIG. 3  is a block diagram of the credit prescreening technique according to one embodiment in more detail. In block  300 , corresponding to block  230  of  FIG. 2 , the credit prescreening system  130  receives demographic data from the retailer POS  110 . In embodiments where the loyalty system  120  communicates directly with the credit system  130 , this demographic data can be received directly from the loyalty system, without passing through the POS  110 . Then in block  310 , the credit system  130  looks up the customer  105  in a data base of previously prescreened customers. If the customer  105  has been prescreened and the prescreening is still valid, then no prescreening is necessary, but the results of the previous prescreening can be used. Any desirable criterion can be used to decide whether a previous prescreening is valid. In one embodiment, the previous prescreening is considered valid for 180 days. The previous prescreening may have been made as a result of a previous transaction by the customer  105  with the current retailer or another retailer. In some embodiments, the customer  105  may have been prescreened as part of a batch prescreening, such as when the credit system  130  has bought a list of customer information and prescreened the list. 
     If the customer  105  currently has credit account, then no credit offer is required. If the customer  105  does not already have a credit account, if the customer  105  matches existing prescreen information, then in block  330  the credit system  130  determines whether the prescreening authorized the issuance of credit to the customer  105 . If a credit offering is authorized, then the system sends an authorization back to the retailer POS  110  in block  370 . If a credit offering is not authorized, then the system sends a not-authorized data to the retailer POS  110  in block  380 . In some embodiments, block  380  is not performed and only data indicating an authorization to offer credit are sent to the retailer POS  110 . The retailer will then offer credit only if authorized by the credit system  130 . 
     If the customer  105  has not previously been prescreened, or the prescreening is no longer valid, then in block  320  the credit system begins a new real time prescreening by sending demographic information to a credit bureau or other source of credit rating data  140 . Typically, a credit bureau  140  will report back a credit score or other similar rating data, with other possible information as requested in block  320 . 
     In block  340 , the credit system  130  receives the credit rating data. In block  350  the credit system  130  compares the credit rating data to selected credit rating criteria. For example, if the credit bureau  140  returns a numeric credit score value, the credit system  130  may compare the returned credit rating to a credit score threshold value. In block  360 , if the customer credit score is less than the selected threshold value (assuming a higher score is a better score than a lower score), then the customer  105  fails the prescreening; if the customer  105 &#39;s score exceeds the threshold value, the customer  105  qualifies for credit. The use of a credit score value and threshold valuers exemplary and illustrative only, and any desired or available credit rating data can be used and evaluated noting any desirable criteria. 
     Then in blocks  370  and  380 , as explained above, the credit system  130  notifies the retailer POS  110  of the prescreening decision. If the customer  105  qualifies for credit, then the retailer may offer the customer  105  credit as described above in the discussion of  FIG. 2 . 
     Turning now to  FIG. 4 , a block diagram illustrates a simplified computer system  400  corresponding to the credit system  130  of  FIG. 1  for performing the credit prescreening technique. Common computer devices not specifically relevant to the discussion are omitted from  FIG. 4  for clarity of the drawing. The loyalty system  120 , although not necessarily a part of computer system  400  corresponding to the credit prescreening system  130 , is shown here for clarity, with alternate connections to either to the retailer POS  110  (such as embodiments where the loyalty system  120  is a third party system) or the computer system  400  corresponding to the credit system  130  (such as embodiments where both the credit system  130  and the loyalty system  120  are provided by the same entity). A processor  410  executes one or more software programs  425  stored in a storage subsystem  420  to perform the actions described above for  FIG. 1 . The storage subsystem  420  can be implemented in any way known to the art as desired. A prescreening data base  430  can be used to store previous prescreening information, as well as any criteria or other data used by the prescreening software  425 . Although shown for clarity as two separate storage subsystems in  FIG. 4 , the arrangement of storage on physical media is not significant for purposes of this technique and a combined or further split storage system can be used as desired. 
     The processor  410  is connected to a network  440 , such as the Internet, and thence to the retailer POS  110  using any desired communication equipment and software. Alternatively, the processor  410  can use the public switched telephone network, or any other desired communication technique to communicate with the retailer POS  110  and credit bureaus  140 . 
     In some embodiments, the retailer POS system  110  must be modified to handle the interface with the credit screening system  400 . The changes necessary would be to modify the POS system  110  using transactions to send to demographic data from the POS system  110  to the credit prescreening system  400  and to accept information about pre-approval for credit. In some embodiments, a standard protocol, for example the ISO-8583 protocol, is used for those transactions. In some embodiments, the modified POS system  110  would display the pre-approval for credit as a screen or other display at the retailer POS  110 , triggering the retailer to offer credit to the customer  105 . In other embodiments, a credit offer can be printed on the receipt or other paper provided to the customer  105 , with instructions on how to apply for credit. 
     Although as generally illustrated in  FIGS. 1-4  the credit prescreening system  130  can be provided by a different service provider from the service provider of the loyalty system  120 , as described above, a service provider can offer both credit and loyalty systems, to further integrate both systems.  FIG. 5  is a block diagram illustrating one embodiment of a loyalty program  120 , in particular a multi-tender loyalty program. 
     Turning to  FIG. 5 , a loyalty system  500  corresponding to the loyalty program  120  of  FIG. 1  involves a number of database tables and processes. Client POS data  505  is received, typically as a batch file, from the retailer POS  110 . A posting process  510  then posts the client POS data to databases  515  (monitoring-transactions) and  520  (non-monetary transactions). A process  525  allows new accounts to be created, as well as processes for allowing members to update their information, such as, but not limited to, interaction with a web page offering account information update capabilities. In addition, service representative screens  530  of the integrated credit and loyalty system provider can update member information in the member account information database  535 , responding to, for example, member telephone calls or other member communications. A data extract process  527  can be used for communication with the retailer  450  for the data needed for the credit prescreening. 
     After the posting process  510  completes, a rewards monetary induction and print assessment process  545  uses the results of the posting process  510  to update the monetary-transaction database tables  515 , and the member account database tables  535  to determine what reward points should accrue to the member based on the transaction, if any. 
     In some embodiments, rewards points can be awarded responsive to the amount of the transaction or the individual items in the transactions. In other embodiments, the rewards points awarded may also depend on the specific item in the transaction, with only some items earning rewards points, or with some items earning more points then other items of equal price. The assignment of awards points is defined by business rules established by the retailer together with program provider. Although the present disclosure refers to “rewards points,” the terminology and value, if any of the rewards units can vary. Airlines, for example, typically refer to rewards points as miles, while other retailers may use simply points or even currency-denominated unit values. 
     As with conventional loyalty programs, members not only earn rewards, they can spend or redeem those rewards points. In block  540 , a rewards fulfillment process can determine what rewards are to be delivered to the member, based on rewards information database tables  555 , tracking fulfillment activity in rewards fulfillment database tables  550 . The actual rewards fulfillment process is a conventional loyalty program process and is not otherwise described herein. In block  560 , a loyalty rewards point communication cycle generates reports and other communications for sending to members, loyalty program clients, and internally through the program provider. Point communication cycle  560  retrieves rewards data from the rewards information database  555 , as well as from member account database tables  535  (shown duplicated herein  FIG. 5  for clarity of the drawing only). The cycle  560  will also update information in the databases, rolling balances and inserting point communication history information. As a result of the loyalty reward point communications cycle process  560 , print communication extracts  580  are created and used by internal point communication processes. E-mails can also be created to notify members and others of reward point value changes and other useful information in block  580 . The process  575  can generate printed point communications  585 , such as statements mailed to members, and update screens  590  for service representatives, using rewards I/O module  565  to update the screens  590 . 
       FIGS. 6A and 6B  are a process flow chart illustrating one embodiment of an integrated credit prescreening and loyalty system, showing what entity performs what actions. As described above, the customer  105  initiates the transaction in block  602  by bringing the goods to be purchased to the retailer POS  110 , or a register that is connected to or a part of the retailer POS  110 . The store associate at the POS  110  then determines in block  604  whether the customer  105  is an existing loyalty member, typically by asking if the customer  105  has his or her loyalty card or other loyalty identification token. If the customer  105  indicates that the customer  105  is not a loyalty member, then the store associate can offer loyalty membership to the customer  105 . If the customer  105  accepts, the store associate in block  606  can request and enter key loyalty information in real time into the POS  110  to enroll the customer  105 . 
     Then the enrollment data is transmitted to the loyalty system  120 , and a new loyalty record is created for the customer  105  in block  608 . In addition, the POS  110  sends the customer  105  demographic information, typically name and address information to the credit prescreening system  130 . 
     If the customer  105  is an existing loyalty member, then in block  610  the store associate or the customer  105  can swipe or scan the loyalty membership token or card to obtain loyalty account information, and display the loyalty record for the customer  105  in block  612 , allowing the store associate to confirm and update, if necessary, the customer  105 &#39;s information. If the loyalty record should be updated, the updated information is sent to the loyalty system  120 . 
     In some embodiments, the retailer  110  can request a batch prescreening of an existing loyalty database. Every existing member of the loyalty database for the loyalty system  120  can be prescreened and the prescreening information stored in the loyalty database. In such embodiments, the loyalty system  120  can, in block  614  determine whether the prescreening is still valid and if so, whether the customer  105  is already authorized to be offered credit as a result of the batch prescreening. If the customer has pre-qualified for credit as a result of the batch prescreening, then the loyalty system  120  can provide a prescreening identification or authorization code to the POS  110 . In embodiments in which the loyalty system  120  is provided by the same entity as the credit system  130 , the loyalty system can interact directly with the credit system  130 , instead of using the POS  110  as an intermediary as shown in  FIGS. 6A and 6B . 
     If the loyalty system  120  does not hold an outstanding batch prescreen for the customer  105 , then the customer name and address or other desired demographic information can be provided to the credit prescreening system  130 . In some embodiments, a credit database subsystem first checks the customer  105  against existing credit account holders in block  616 . If the customer  105  already holds a credit account, the credit database subsystem sends account information to the POS  110 , so the store associate in block  618  can inquire if the customer  105  wants to pay for the purchase using his or her existing private label or co-branded credit card account. 
     If the customer  105  is not a current credit account holder, then in block  620 , the credit database system determines whether an outstanding prescreen exists for the customer  105 , as described above and in  FIG. 3 . If a previous prescreen remains valid for customer  105 , then the prescreen identification or authorization code can be sent to the POS system  110 . 
     If no valid prescreen is outstanding for the customer  105 , then the real-time online prescreening process described above and in  FIG. 3  can be performed to prescreen customer  105  with one or more credit bureaus  140  in block  622 . 
     Turning to  FIG. 6B , in block  624  the results of the prescreening are used to decide whether the customer  105  is pre-approved for credit. If not, then in block  626  no offer of credit is made. 
     If the customer  105  is pre-approved for credit, either from a previous batch prescreen, a previous real-time prescreen, or the current real-time prescreen, then a prescreen identification or authorization code is sent to the POS  110 . The store associate can then in block  626  offer credit to the customer  105 , offering a private label or co-branded credit account, providing any disclosures to the customer required by statute, regulation, or policy, typically in printed form. The customer  105  then in block  628  decides whether to accept the credit account. 
     If the customer rejects the credit offer, then the store associate can indicate to the POS  110  in block  630  that the customer  105  rejected the offer. The POS  110  can then pass that information on to the loyalty system  120 , the credit prescreening system  130 , or both. In that event, no letter or further communications with the customer  105  regarding a credit account are required. In some embodiments, the rejection is stored so that if the customer  105  makes a future transaction, the prescreening and credit offer is not repeated. In other embodiments, the credit offer can be made in future transactions. 
     If the customer  105  accepts the credit offer, then in block  632  the store associate can obtain any necessary information required to open the credit account, typically a street address, ZIP code, date of birth, and at least the last 4 digits of the customer  105 &#39;s Social Security number. Then in block  634  the POS  110  can send the prescreen acceptance to the private label or co-branded credit card issuer. If the demographic data of the prescreen acceptance differs from the demographic data used for the original prescreen, then the altered prescreen data can be updated by the call center upon receipt of the prescreen acceptance data. For example, if the customer  105  has changed his or her address since the prescreening data was collected, personnel in the call center can update the demographic data appropriately. Additionally, in block  636 , the call center can message the POS to prompt the store associate to correct data variances, such as when a Social Security Number was entered incorrectly, to allow the account to be opened. Then in block  638 , the credit issuer opens a private label or co-branded credit account for the customer  105 . Account information is returned to the POS  110  to allow the POS  110  to use the new credit account as tender for at least a portion of the transaction. Finally, in block  642  the credit issuer sends the usual printed documents to the customer  105 , typically by mail, with privacy statements and other legally required information, as well as the actual financial instrument, such as a credit card. 
     As shown in  FIGS. 6A and 6B , the loyalty system  120  is not necessarily operated by the credit prescreening system  130  and the credit issuing entity. But when those systems are all operated by the same entity, additional integration advantages will be apparent to the person of ordinary skill in the art. For example, as described above, the loyalty system  120  and credit prescreening system  130  can be integrated into a single system in some embodiments, or in other embodiments can interact directly with each other, using the retailer POS  110  less as an intermediary between the two systems. 
     The processes, steps, and ordering of steps in the above are exemplary and illustrative only and other processes, databases, tables, reports, etc. and other ordering of processes and steps can be used as desired. 
     While certain exemplary embodiments have been described in details and shown in the accompanying drawings, it is to be understood that such embodiments are merely illustrative of and not devised without departing from the basic scope thereof, which is determined by the claims that follow.