The True Cost of Credit Decision Engines

Credit Decision Engines are a special breed of business management rule systems that contains mathematical operators, logical expressions and if you are lucky, third party data integrations and maybe a sprinkle of user interface.

So what is the true cost of a decision engine?

In our opinion, decision engines should be offered as a free module inside of a bigger platform. The decision engine itself creates zero economic value to the users. Creating interesting business rules and pricing strategies creates value for the users.

For instance, I am writing this article on a word processor that is completely free to use. I am creating value by disseminating knowledge and researchers and scientists using these free tools to advance knowledge in their own respective fields. 

When we speak to our customers, we are astonished at the amount of money people are being asked to spend on decision engines which they use very little of and can’t justify the value. 

These clients are being asked to pay thousands or tens of thousands of dollars on a tool they barely understand or have the ability to use.

We believe that a credit decision engine should bring value to the customers and just like a word processor, it should be free to use.

When should you pay $10,000 per month for a credit decision engine? 

There should never be a scenario where a decision engine, however fancy, should cost $10,000 per month to use. Unless you are running millions of transactions, a start up and a midsize enterprise should never have to pay for decisioning services.

With today’s cloud computing infrastructure, running a few mathematical operations should cost a minuscule amount of energy and therefore cost. Even when multiple third party integration partners are involved, these API calls don't need much network capacity of computing power. These computational driven transactions such as running a few decision trees should cost near zero.

Why is there a huge mark up on decisioning software?

We believe that there are multiple factors involved. One of which is the availability of offerings. When there are a few decision engine firms out there offering a suite of tools, the market naturally drives the prices up.

The other reason is overhead or mission to drive profit. When there’s pressure to increase the bottom line, there is no end to the myriad of logic that goes behind pricing software.

We think over engineering is another reason why prices are kept artificially high. Most of the clients don’t need an overcomplicated decision engine. They may have a handful of rules handling identity verification. A few other rules to generate an underwriting decision. After that, they might have more rules to handle product offerings and such. 

An over complicated decisioning system may justify a high price tag, but the client shouldn’t have to pay for an over hyped and over engineered product.

If you must pay for a bloated piece of software, here are what you need to know

• First, look for all the third party data providers you need to run your business rules. Some decision engines don't have any third party integration capabilities. You, the client, must develop a layer of connectivity and feed these decision engines with perfectly groomed data. We think that’s very antiquated and clients shouldn’t have to spend more money and resources to crank these credit decision engines.

• Second, does the credit decision engine create dynamic offers? Running rules is one thing, creating multiple products and various product offerings requires an entirely different architecture. When a customer gets an approval from you, you should offer as many variations of products as you please, or at least have the ability to. If your decision engine can only render a yes or no response, you should look for a solution elsewhere.

• Third, can your decision engine direct traffic? A well developed decision engine should also help you direct traffic. From a customer facing point of view, the decision engine should drive the customer down to a specific route depending on their application’s condition and status. Behind the scenes, your decision engine should direct the application to a specific queue for the back office personnel to further disposition or adjudicate the application and help the customer get through the application. If your decision engine lacks these capabilities, you should ask them for it in their next release.

• Fourth, the decision engine must communicate with your customers and your staff. These decision engine’s decision trees should text and email end customers and back office staff and alert them on the status of their application. The decision engine should be smart enough to text and email specific messages under specific circumstances. Your decision engine should have these capabilities out of the box.

• Fifth, the decision engine should pick up where they left off. Sometimes the customer is asked to complete an offline task such as uploading certain documents or log into a certain third party tool. The decision engine should wait for that specific task to be completed and move onto the next stage of the application process. If your decision engine has no memory and must complete the application in one sitting, you should look elsewhere, especially when you are asked to pay tens of thousands of dollars for the software.

So what should I do?

If you have a decision engine and it costs an arm and a leg, take a look at LendAPI’s Decision Engine. It’s a free tool that comes locked and loaded with our digital onboarding system. Our pricing is clear and fair. We are happy to help you transition your logic into our system.

If you are starting from scratch, feel free to sign up for our digital onboarding system and take a look at our decision engine and our decision tree builder. We have a 30 day free trial for you to build and test. 

If you are still unsure about your decision, head on over to our documentation section. We have a whole article dedicated to our decision engine. Starting with our Variable Library and how to build custom variables to a step to step guide on building your first rule.

The true cost of a credit engine is an overpriced, over engineered piece of software that you might only use 10% of with limited capabilities. 

About LendAPI:

LendAPI is a no-code, DIY (Do it yourself) digital originations platform with a fully customizable product designer with the ability to manage applications fields, upload documents and customize consents. LendAPI also has application workflow management, visual decision engine, third party integrations as well as various customer communication methods such as SMS and email all in one super affordable investment. A complete multi-tenant, point-of-sale capable,  white-labeled solution that can help you launch your finance products quickly.

To sign up, please visit app.lendapi.com/signup. We have a 30 day free trial with no obligation.