Long delays in the ability to gain access to credit by new entrants to the UK are being addressed by a system launched in a partnership between HSBC UK and cross-border credit bureau Nova Credit.
Currently, the Nova system enables newcomers to share their credit history from a growing list of around 12 countries that currently accounts for more than 70% of the bank’s customers. HSBC has invested $10m to accelerate international roll-out of the system.
The announcement in September followed publication of research by Nova Credit showing immigrants to the UK consistently wait longer and are treated differently from UK-born applicants when applying for essential credit services.
The research shows that:
- more than half of UK immigrants will apply for more credit in next 12 months, with one-fifth seeking mortgage finance;
- the UK’s 10 million-strong immigrant population is a creditworthy expansion opportunity hiding in plain sight of lenders;
- for two in three (66%) immigrants, the process to receive credit products takes longer than it should due to applicants’ lack of UK credit history; and
- more than half (55%) feel they have been treated differently because of their lack of UK credit history, and an even higher proportion (59%) have been told by lenders and financial services providers that they would be treated differently. Only one in four (26%) of immigrants who moved to the UK in the past 10 years have experienced fully online processes to access credit products and services.
Nina Mohanty, co-founder of Bloom Money, which provides a savings club for the immigrant community, welcomes the UK launch. “As someone building a company for underserved immigrants, this is music to my ears,” she says. “I do wish that I had had this opportunity 10 years ago when I arrived in the UK.”
Nova Credit has obfuscated the complexity that comes with feeding in credit scores and the associated data pipeline into HSBC, she says. However, she describes it as “a Band-Aid on a systemic problem”.
“Credit rating agencies make this process too complicated and opaque so that people cannot form credit scores for themselves,” she explains. “The credit rating agencies purport to want to help, to purport to want to get further along in financial inclusion and yet they don’t make it easier.” They have failed to invest in their own infrastructure to make it easier to feed in new data, she adds.
The UK immigrant population is one of the fastest-growing demographics in the country. According to 2021 statistics, more than 10 million people living in the UK were born overseas and annually more than 800,000 more people are granted long-term visas to work or study in the UK. Currently, 95% of the country’s net population growth comes from immigration.
Madhu Kejriwal, head of unsecured lending at HSBC UK, says there is no plan for the bank to target any particular customer profile. “We will offer it to all our international customers,” he says. “But what we see from our experience is that these international customers have their own unique profiles like the start profile, the student profile and so on.
“When I came here 12 years ago from the US we did not have this kind of a facility. And it felt like I was starting from scratch again. So it’s quite personal for me.”
Nova Credit founder and CEO Misha Esipov says the facility “allows businesses to win the only source of population growth and there are benefits across credit underwriting, know your customer, fraud and anti-money laundering”.
He adds: “The product is we’re helping banks serve their consumers and meet their duty to help people onboard into these accounts. If you think about the experience of someone who just moved here, they can’t apply digitally, because they don’t have an identity here yet. And then they walked into a branch they couldn’t get approved for credit.
“We were able to increase newcomers’ approval rates by 79%, which is a very big deal for this segment. This is a big deal. It really speaks to the binary nature of whether this segment can or can’t access financial services, and we’re able to take a population that is otherwise invisible when they arrive and to get a very meaningful share of them approved.”
In addition to the UK, Nova Credit has live partnerships with lenders and businesses in the US, the UAE, Singapore and Canada, and partners include American Express, Verizon, Scotiabank and SoFi. In the UK, where it is deployed by HSBC, it is called the Nova Passport and outside the UK it is called the Credit Passport.
