Introduction
In the ever-evolving world of credit, understanding historical contexts and contrasts between different credit concepts is crucial when creating financial wellbeing programs in Medium and Large organizations. For HR leaders and Finance executives, grasping these nuances is particularly important, especially when considering employee benefits to increase financial wellbeing and employee engagement. In this blog post, we’ll explore the journey from traditional “subject to approval” credit to modern “pre-approved” credit solutions and how these developments align with the innovative offerings available to employees through CashDepot.
The Historical Context of Credit
The concept of credit has been integral to economic transactions for centuries. Historically, credit was informal, based on trust and reputation. As commerce grew more complex, so did credit systems. The advent of formal banking in the Renaissance period marked a significant shift, leading to more structured lending practices.
In the 20th century, consumer credit took center stage by introducing credit cards and installment plans. However, these were typically “subject to approval,” meaning each application underwent a thorough review based on an individual’s financial history and current situation. This process ensured responsible lending but often came with longer approval times and a higher likelihood of rejection and financial exclusion.
The Rise of Pre-Approved Credit
The late 20th century saw a pivotal change with the advent of “pre-approved” credit offers. This shift was driven by advancements in data processing and credit scoring technologies, enabling lenders to pre-screen potential customers. These offers indicated that the recipient met specific preliminary criteria, making them likely candidates for credit approval.
Benefits and Challenges:
The contrast between these two credit systems lies in their approach to approval. “Subject to approval” credit provides a thorough vetting process, ensuring tailored credit products and responsible lending. However, it can be time-consuming, uncertain, and always to the detriment of low-income applicants.
On the other hand, “pre-approved” credit offers speed and convenience, often with attractive terms, but also may miss the mark, and they come with their challenges, such as the risk of unsolicited offers, the potential for consumers to take on more debt than advisable, and because most low wage employees do not have good credit, they are left behind.
CashDepot’s Innovative Solution:
At CashDepot, we’ve embraced the “pre-approved” concept to offer a unique solution to employees of affiliated companies. Our pre-approved lines of credit serve as an emergency fund, salary advances, and consumer lines of credit. This approach provides employees quick access to funds when needed, reducing financial stress and contributing to overall wellbeing. At CashDepot, being employed is enough not only to have access to credit but also to serve as a vehicle to repair and build credit.
Conclusion
The evolution from “subject to approval” to “pre-approved” credit reflects broader trends in finance towards efficiency and personalized services. For HR leaders and Finance executives, understanding these trends is critical to offering competitive benefits that meet the needs of today’s workforce. With CashDepot’s pre-approved credit solutions, companies can provide their employees with a valuable financial tool, reinforcing their commitment to employee support and financial wellbeing.
