It took a VC-funded Silicon Valley startup to reengineer the loan application process for the Web.

NextCard’s elegant main screen downloads fast, uses white space just like they teach you in graphic design 101, and employs just 25 words to convey who they are, why you should buy from them, and how to do it. A perfect 10!

Internet Access Financial Corp.

www.nextcard.com

A couple times each year we run across a product that truly advances the state-of-the-art in online financial services. Nextcard, from Internet Access Financial Corp. (Palo Alto, CA) and issued through Heritage Bank (San Jose, CA; $268 million), is our first such find for 1998.

From top to bottom, this is the best financial services Web site we’ve seen. It’s a textbook example of good design, consumer-friendly copy, and effective selling techniques. It’s that much more impressive considering it’s just a few months post-beta. Here are the five most important attributes:

•  It Sells – You don’t often see a home page that sells. Nextcard posts its four primary benefits where they can’t be missed (see screenshot above). From the moment you enter its site, you know exactly what is going on and what to do next.
•  It Provides Instant Gratification – The instant, interactive credit application provides provisional credit approval in about 60 seconds.
•  Balance Transfers are Integrated with the Credit Application – During the application and approval session, users must complete a balance transfer (assuming they accepted an offer with that condition). NextCard makes it painless by presenting a summary of outstanding revolving credit balances gleaned
  from the credit report. Users simply select which balance(s) to transfer and press enter (see screenshot p. 18).
•  Users Can Easily Review and Sort Transaction Data – NextCard’s Transaction Sorter brings Quicken-like analytics to an easy-to-use Web site (screenshot below).
•  No-Fine-Print Fraud Protection – Finally, a financial institution with an understandable guarantee (see screenshot p. 14).

NextCard’s Transaction Sorter. The power of Quicken in an easy-to-use Web site.

 

Lessons from NextCard

 

1. Make your First Screen Sell; but not like a six-panel brochure, more like the cover of a direct mail piece. CEO Jeremy Lent describes the Web as “a new direct marketing arena.” You can see that philosophy played out on the NextCard home page (left) which consists of just 25 words divided into one slogan, one money-saving offer, three icons, three logos, and three choices of what to do next (remember what your speech teacher told you about grouping main points into threes). NextCard effectively demonstrates how “less is more” when engaging users on an entry page.

Slogan

“The first true Internet Visa” assures users they have come to the right place to be on the leading edge. While this slogan has great appeal to early adopters, it may have to be retooled for the pragmatist mass market who just want to know if the thing works properly. In 2000, the slogan may need to be, “Join the 2 million users of the first true Internet Visa.”

Logos

1. NextCard – Cleverly designed with the emphasis on CARD so users know what is being sold.

2. Visa – NextCard wisely leverages the ubiquitous Visa brand not once, but twice in the upper right and lower left areas of the screen.

3. Member FDIC – This all-important logo instantly signals a legitimate banking organization rather than some shady credit repair outfit. Moreover, NextCard doesn’t squander this essential asset by relegating it to the bottom of the screen where users must scroll down to see it. That would be like Microsoft leaving its Windows 95 logo off the box.

Icons

NextCard summarizes its main benefits in three animated icons designed with a graphic of the key feature overlaid on rotating text with more details:

1. INSTANT Online Approval – A major benefit for the short attention spans on the Web, plus a major differentiating factor from the hundreds of other credit card applications on the Web.

2. 100% SAFE Online Shopping – Addresses a significant concern while further differentiating the card from the pack.

3. ONLINE Everything – Delightful words for hard-core Web users.

Functions

Many Web sites have ten or more choices of where to go from the main page, and rarely is one of them a “buy now” button. That’s an appropriate layout for news and entertainment sites, but as a financial institution your Web site exists for two reasons:
(1) to sell products, and (2) to serve customers.

NextCard addresses those two needs and adds a third: a user feedback button, a function that is often relegated to some far off corner of the site.

1. Apply Now! – There is absolutely no confusion on how to buy the company’s product.

2. Customer Login – Existing customers are given prominent attention with a well-situated login button.

3. Feedback – Wow, a company that really wants to hear from users. It’s a great first impression (even if they never act on it).

The Offer

In the upper righthand corner of the main screen a “rates as low as 2.9%” teaser (not shown) rotates with the Visa logo (shown). Web users, like most people, like to find a good deal. NextCard promises one with a 2.9% teaser rate (although it lasts only three months).

Web-based credit card statements:
state-of-the-art, circa 2000.

2. Highlight Online Features and Benefits: This might seem obvious, but think about it. By definition, every visitor to your Web site is an Internet user. Do you speak to them in their terms? Do you highlight the benefits of banking with you online? Even if you don’t have the bells and whistles funded by $3.5 million dollars of venture capital, you can emphasize your email responsiveness, self service options on your Web, discounts at online merchants, and so on.

*industry firsts **potential industry first

3. Turn Fraud/Privacy Fears into a Product Feature: There’s an old high-tech adage: “It’s not a bug, it’s a feature.” Internet users have expressed fears about entering credit card numbers online. Some established credit card issuers have used consumer hesitancy as an excuse for moving online slowly. Upstarts such as NextCard can use the fear to their advantage by guaranteeing cardholders against liability for fraud. The irony is that Reg. Z mandates fraud protection, except for the first $50, to all U.S. credit card holders.

Other issuers have toyed with fraud protection, most notably AT&T Universal Card, now owned by Citicorp and more recently First USA/Yahoo. NextCard has the most succinct wording (below). Again, less is more with an 18-word no-nonsense guarantee. Read the entire 100% Safe FAQ, a marketing masterpiece at www.nextcard.com/safeonlineshopping.htm

NextCard 100% Safe Shopping Guarantee:
When you use your NextCard Visa to make purchases over the Internet, you are never liable for fraud*
*No conditions. No exceptions. No excuses. Guaranteed.

An understandable credit card fraud guarantee.

Nextcard is advertising on InfoBeat’s popular Closing Bell, an HTML email that reports closing stock prices and news related to stocks in your portfolio.

4. Deal with Security Issues: Sometimes it’s easier to just ignore tricky subjects like security. There are dozens of reasons not to deal with it:

•  We’ll just be making ourselves a more appealing target for hackers.
•  Legal will never approve it.
•  Compliance will never approve it.
•  Who is going to write it?
•  Who is going to keep it up to date?
•  We don’t want to provide any clues on how to crack our system.
•  We don’t want to scare users.

Sorry, these excuses aren’t good enough any more. Users are concerned and looking for answers. A financial institution that doesn’t offer answers and assurances isn’t doing its job and risks losing credibility with customers.

NextCard deals with the issue head on in the best security discussion we have seen at any Web site www.nextcard.com/security.htm The reason: It’s written from the perspective of the user, at their level, addressing their concerns. It even deals with one of the biggest weaknesses of Internet commerce, physical security of the server.

They also name drop: Coopers & Lybrand has reviewed its procedures; Exodus Communications handles physical and network server security. It’s especially important for an unknown company such as NextCard to associate with better known companies to increase credibility.

NextCard’s “Our Commitment to Security” really is.

 

5. Design the Online Application from the User’s Perspective: All the brilliant marketing would be for naught if the actual credit application was poorly done. It’s a common problem. The marketing department and/or high-flying Web designer creates a killer loan area, but the application itself is just an HTML version of the bank’s 8.5 x 14 inch paper form.

NextCard doesn’t make that mistake (maybe because it starting from scratch without the paper form). Its online application is surprisingly bright, informative and absolutely a breeze to fill out. The places where the user must input information are highlighted in yellow (see screenshots on the next page, or read the remainder of this article on our Web www.onlinebankingreport.com so you can see the screens in color to better appreciate the top-notch design work).

Bright red and blue instructions and arrows assist users in completing the form or finding additional information. For example, in the first screen of the online application (below), users are provided links to the Security page and the company’s Privacy Policy.

The company informs users where they are in the process (e.g., screen 1 of 2) and posts plenty of helpful instructions (though no 800 number). At every step its clear what to do next (e.g., big bright red “continue” button), and there is little, if any, scrolling required.

Pre-application Screen: Links to security and privacy make users feel more comfortable with the process. Unlike paper forms, Web forms need to sell/educate every step of the way since users can bail out at any time. Note: The “continue saved application” button.

NextCard’s Two-Screen Application

 

Screen #1: Get the easy stuff first:
name, address, and phone number.
Note how the form is placed in reverse highlights.

Screen #2: Now that the applicant is engaged, ask for the sensitive info: social security number, employer, income, mother’s maiden name, and e-mail address. Note the tone, “This is the last page (short, huh).”

 

6. Make the Approval Process Interactive: We usually don’t submit a live application when testing. But we just couldn’t resist pressing “submit” for the NextCard. And we are glad we did. The real-time balance transfer function was worth whatever hit to our credit rating we’ll get for adding yet another unsecured credit line to our file.

After the on-screen celebration of your approval (confetti falls down the left side of the screen), you are whisked away to the Design Your Own Offer page, an empowering exercise with the makings of a powerful cross-selling tool. Think how you could upsell home equity-secured credit at this point.

However, at least in my case, the “design your own offer” was anticlimactic. I could qualify for the 2.9% teaser rate if I transferred $5,000 to the card, but the credit line was only a puny $6,000. And the promised choice of offers was mostly illusory. The vast majority of users will select the Best Deal because it has both a higher credit line and lower teaser rate than the other three choices. It does require a balance transfer nearly equal to the credit line. The company plans to expand product/price options dramatically later this year, so this portion of the application process will become far more meaningful.

Application Approval-in-Process Screen: You look at this screen for the 30 to 120 seconds it takes to approve your application (57 seconds for mine). The red button on the bottom of the screen pops on when completed.

Approval Screen: Upon approval, you’re greeted with a big congratulation, complete with virtual confetti, and strokes about being part of history. Then you are invited to “design your own card offer.”

Design Your Offer Screen:
Requires users to select one of four offers.

 

7. Allow Users to Come Back to Applications in Process: Dial-up users experience all kinds of disruptions when using the Internet: call-waiting, crying babies, Windows 95 freeze-ups, dropped connections, and so on. NextCard wisely includes a “Continued Saved Application” function that allows users to re-enter the application process at any step of the way by entering name, social security number and mother’s maiden name. Applications are kept “active” for 72 hours, after that it’s considered a withdrawn application.

Choosing “save application” gives you 72 hours to return and complete the application.

During our test application, we had to reenter the saved application four times over three days before we finally finished the process. It seemed the problems were on NextCard’s end, but in discussions with customer service and later with upper management, I’m convinced my experience was an anomaly.

The agony of defeat. Before I could accept the offer, I was hit with multiple “404 Not Found” error messages. After logging back in several times, I eventually completed the process.

 

8. Get the Balances Transferred Online: Another marketing tenet: The best time to get someone using a product is right after they’ve bought it. Therefore, NextCard integrated the balance transfer process right into the application. After selecting an offer, a personalized balance transfer form is created by pulling data from the credit report. The form includes creditor name, outstanding balance, suggested balance transfer (equal to outstanding balance), and account number (with last four digits truncated for security). To complete this final step, users enter transfer amounts equal to or greater than the minimum required in the offer selected, and fill in the last four digits of the account number(s). The Javascript form automatically keeps a running total at the bottom of the form.

Balance Transfer Screen: Actual revolving balances are shown. The transfer is completed by entering an amount and filling in the last four digits of the account number.

 

9. Don’t Leave Applicants Hanging: NextCard’s Web site does a good job of reminding users what they’ve just done and what comes next. For example, after completing the application the following steps are listed (screenshot right):

•  Step 1: Customer service rep to call to verify info within a “few days.”
•  Step 2: Account info and card to arrive 7-14 days after completion of step 1.
•  Balance Transfers: To take place within two weeks with email notification promised when completed.

We were surprised at the lack of proactive communication from NextCard. We haven’t received so much as a single email during the three days it took to submit the application, nor in the seven days since we finally completed the process. We have no idea if our application is still pending, whether it’s been lost, or even cancelled. To address this weakness, the company is planning to integrate email communications into the process later this year.

Confirmation Screen: One last look including a recap of credit line, teaser rate, and balance transfer details before pressing Confirm Offer to make it official.

 

10. Learn from Cancelled Applications: It’s the nature of the Net that users will test your application then bail out before hitting submit. NextCard learns from unfinished applications by posting a mini-feedback form for those exiting the process (screenshot right).

Final Screen: Congratulations and detailed next steps, plus FINALLY a toll-free number.

Cancellation Screen: If you choose to cancel the application after receiving your offer, the company throws a short questionnaire at you to find out why.

Areas for Improvement

As much as we liked the company’s marketing approach and Web site, based on the problems we encountered with our test application, there are still bugs and glitches to work out. But it’s a new site, so we figure the company will iron out the bugs before full-scale marketing efforts kick in later this year.

We are also disappointed that NextCard has elected to follow the borderline bait-and-switch tactics common in direct mail today: three months at 2.9%, then prime plus 9.9%. Compare that to the Yahoo/First USA card with a 9.9% fixed rate. After all the effort the company expends impressing users with a high-quality Web and application, it’s a shame to end up with a product many users won’t want to use. The APR is too high for heavy revolvers and there are no miles for the heavy transactors. CEO Jeremy Lent told us that NextCard would be rounding out its product line in the near future. Presumably, that will include lower APR options and an airline mileage program.

Another major improvement promised by Mr. Lent is integrated email and telephone access to service reps during the application process. Had I been a normal applicant, I never would have continued after being locked out four times.

Finally, a minor flaw. The address listed on the Web is a P.O. Box. As a skeptical prospect, we would feel more comfortable with a street address. It could be Heritage Bank’s address.

What’s Next for NextCard

We talked to CEO Jeremy Lent about NextCard’s business plan. The company has big plans, and not just for credit cards. NextCard expects to become a fully-chartered thrift by year-end marketing a full line of banking products. It also plans an aggressive online marketing program this fall. They intend to concentrate exclusively on the online medium, keeping far away from the overused direct mail approach.

This will require money, buckets of it. Last fall Brentwood Venture Capital invested $3.5 million in a first-round financing. NextCard expects to announce additional funding in the near future.

The company has purposely kept a low profile so far, issuing just a single press release in February. It’s fine-tuning and expanding its operations before all-out marketing. Even so, the company is ahead of plan and will be releasing volume figures in the near future.

NextCard is rapidly building an infrastructure to process tens of thousands of credit card applications per month. The company has 39 marketing/ credit/technical positions posted on the Yahoo/ Monster Board alone employment.classifieds.yahoo.com/california/employment/n/nextcard/index.html.

It is also building a credit card lead-generation site called CreditChoice at www.creditchoice.com (screenshot right). While it’s currently little more than a “Web placeholder,” if it receives the same attention as the flagship site, it could grow to compete with GetSmart, Ram Research,Bank Rate Monitor and others.

Although Lent has no plans to license the NextCard platform, or sell the business, future strategies will depend on how successful the company is in attracting profitable customers in the next 18 months. If that strategy doesn’t work, the company still has a number of attractive options available:

• Develop leads for other issuers through its NextCard and CreditChoice sites.
• Expand into other loans using the NextCard engine, especially home equity-secured loans and lines of credit.
• License its marketing and delivery platform to other card issuers, financial institutions, and non-banks.
• Sell the company to another bank/card issuer.

All in all NextCard is a fascinating story, one that we will follow closely in the coming year. It’s the first of several sophisticated, and well-funded, efforts to build the Amazon.com of financial services. The mega-card issuers, Citicorp, Bank One, Chase, First Chicago, and others, might want to make Jeremy Lent and his investors an offer they can’t refuse before this company goes public and becomes a $200-million entity.8

Contacts: Jeremy Lent is CEO of Internet Financial Access Corp. in Palo Alto, CA, (415) 836-9770.

CreditChoice is NextCard’s consumer info and lead generation site that’s mostly under construction.

Nextcard is a sponsor of webcal, a personal datebook advertised on AltaVista www.webcal.com