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Since the first online banking offering went live on the Web in 1995, consumer banking has pushed further onto the Web every year. Every year, more and more banks are offering Web-based applications for checking accounts, more banks are offering pay-anyone Web bill payment and more retail banks are offering Web-based self service. The online push is inexorable, except when it comes to the old standby of credit card-issuing banks and non-bank financials: the take-one credit card application.

Take-one credit card applications are applications that are made available to all comers, not just prescreened invitees. Take-one applications are typically displayed at a store counter or even slipped into a bag of groceries. In the online world, more and more credit card issuers allow prescreened, invited applicants to fill out applications on the Web. But they do not take one common approach to how to handle take-one applications online. Indeed, some issuers go back and forth from one month to the next in the degree to which they accommodate uninvited online applicants. This article examines the conflicting trends in this facet of online cardholder acquisition.

Issuers fall into three groups according to how they handle would-be online applicants they haven't directly solicited. The first group, typified by firms like American Express and Citicards, take a candy-store approach by making online applications available to all applicants for a wide variety of cards. The issuers that take this approach tend to be well-known financial services brands in their own right with very large prime customer bases.

This approach may make good sense for well-known issuers as opposed to issuers who are less well-known, who cater to subprime borrowers, or who are tied into a retail banking strategy or rely on third-party brands and affiliations. The relative merit of this approach to the well-known prime issuers is a lowered risk of adverse selection: the average uninvited applicant is more likely to respond to the brand or to a recent advertisement. This applicant is therefore less likely to visit the site because several rejections have set them off on a hunt for an issuer, any issuer, who will give them credit.

Issuers in the second group, typified by firms like Household and Providian, take a limited access approach. Under the limited access approach, the issuer offers unsolicited online visitors the opportunity to apply for some but not all card programs, or provides these online applicants with much more limited options during the online application process. Potentially more desirable cards or more powerful application features (e.g., allowing for balance transfers at an advantageous rate) only go to prescreened customers. This approach addresses the adverse selection gap between invited and uninvited applicants by capping the issuer's exposure to fraud and delinquency by uninvited applicants.

A third group of issuers effectively dispenses with the online take-one application by restricting online applications to those who either already have a relationship with the issuer or an affiliate, as Wells Fargo does, or to prescreened invitees, as Direct Merchants does. Issuers restricting online applications in these ways typically experience the widest gulf in the quality of invited and uninvited applicants because they don't do much to promote their card programs with massive advertising campaigns and are therefore not the first issuer most would-be applicants think of. If the issuer is not top of mind for a prospective cardholder, then the issuer will tend to get the application when other issuers have already declined the prospective cardholder.

Wells Fargo may indeed be top of mind for existing customers of its other products, and the firm regularly invites qualified customers of these other products to apply for a card online. Direct Merchants will be top of mind for targets who receive one of its promotions and an invitation to go online to get the card. Those simply seeking to obtain a card from any issuer need not apply online with these two organizations.

There is no overwhelming trend in online card acquisition and a year from now there will still be issuers taking each of these three approaches. While the largest and best known issuers have been streamlining the applications available to unsolicited site visitors, others do not want this unsolicited application flow or want to restrict it to particular card programs due to their brand profile, their strategy or their risk tolerance.

More generally, card issuers continue to demonstrate a "test, refine, and test again" approach with the Web. Even the issuers that most aggressively court uninvited online applicants have gone back and forth on whether to offer these applicants instant approval and, if they do, whether to offer instant credit. Right now, instant credit offers are virtually unheard of, but that was not the case three years ago.

Maybe card issuers have fully embraced the Web after all. The constant tinkering and the combination of different approaches as issuers define their niches and seek a competitive edge, the battle against fraud and delinquency -- all these attributes of online card acquisition suggest credit card issuers are indeed embracing the Web in their own inimitable way.

Chris Musto is vice president of research for Watchfire GomezPro, in Waltham, MA. He can be reached at [email protected].