HSBC has begun working with Nova Credit, a fintech whose technology makes credit bureau reports and scores collected in one country usable in another, to help it onboard and provide credit to immigrant customers.
The London-based bank has also invested $10 million in the company.
"We know that when expats move to a new market, being unable to access their overseas credit histories digitally, and have them recognized by banks, is a problem," said Catherine Zhou, global head of ventures, digital innovation and partnerships at HSBC.
Nova Credit's technology lets the bank instantly access the credit history of new-to-the-country consumers, "making it easier and quicker for their credit history to be recognized and to receive an informed credit decision on their credit application," Zhou said.
HSBC has been ramping up its ability to serve immigrants. The number of customers the bank classifies as "international" in its wealth and personal banking groups is 5% higher than it was in the first half of 2021. This includes people who use the bank in more than one country and who use its products in markets other than their country of origin.
"This is both our fastest growing customer segment, and our most commercially attractive," Zhou said. The bank also offers immigrants a global payments service and the ability to open a bank account in a new country even before they have arrived.
Before this partnership, HSBC assessed immigrants' creditworthiness by using data it already holds on customers that bank across markets or requesting documents directly from customers, Zhou said.
The bank's aim in its work with Nova Credit is to improve this process, "for the first time providing integrated access to international credit data with no hassle," she said.
The relationship between HSBC and Nova Credit has been in the works since before the pandemic.
"It's not easy to bring a partnership like this, which is a multiproduct, multigeography, multiyear rollout to life," said Misha Esipov, co-founder and CEO of Nova Credit. "But it's truly transformational for us and transformational for HSBC in terms of their ability to serve this segment. And in our view, it's a bold step in terms of bringing the world together at a time where it seems to be fracturing."
HSBC Singapore is the first HSBC entity to use Nova Credit's service, Zhou said. Singapore has a large population of foreign migrants. The software is helping the bank serve thousands of new to Singapore customers who have credit history in India.
The bank plans to expand the Singapore bank's use of the service in the fourth quarter. It will let customers retrieve their credit history from the U.K., Australia or the Philippines when applying for a credit card.
HSBC is not Nova Credit's first big client.
Nova Credit has formed data partnerships with credit bureaus in 20 countries, including India, Mexico, Canada, the U.K., Nigeria, the Philippines, Korea, Kenya and most recently, Ukraine. The company can access credit data on more than a billion consumers, Esipov said.
At first, this data was only made available to U.S. clients, to help U.S. banks serve migrants moving there.
With the HSBC agreement, the system will be broadened to serve migrant corridors outside of the U.S.
"If you're someone from India moving to Singapore or someone from Nigeria moving to London, or someone from East Asia moving to Canada, every one of these major immigrant corridors is an example where this information asymmetry exists, where they have data in one country, but they don't have data in the other," Esipov said. "Our global data infrastructure now allows for this information to seamlessly and compliantly move around the world and HSBC is an anchor partner that's allowing us to bring this capability to the largest expat markets in the world."
Importing credit histories from other countries when some of those countries have credit history systems that are very different from what exists in the U.S. is a challenge, pointed out Chi Chi Wu, attorney at the National Consumer Law Center.
"Some countries have negative-only systems; others have public systems or even prohibit the type of system we have," she said.
The fact that some countries only report negative behavior is a challenge, Esipov acknowledged, but it's one Nova Credit has learned to navigate, he said.
Ultimately, credit reporting data captures a consumer's willingness to repay, he noted.
"That basic concept is identical in every credit reporting regime around the world, but the depth of information that you see has some variance and so core to our business practice is even before we sign one of these partnerships, we go line by line through every one of the credit data elements and try to understand how they are or aren't similar to the U.S. standard and connect those dots to create that global data dictionary," Esipov said.
Newcomers to the U.S. tend to have a hard time getting credit cards because they lack credit history here. Amex has deployed technology from a fintech, Nova Credit, that could change this.
According to Esipov, Nova Credit already has an impact on immigrants' lives.
"A large percentage of the annual flow of immigrants into the U.S. who otherwise arrive credit invisible and struggle with the very basic components of establishing a financial life here — getting a bank account, opening up a credit card, being eligible for an auto loan, being eligible for a student loan, getting an apartment lease, getting a cellphone plan or device financing — we can unlock all of those opportunities for people and make them accessible and make them more affordable," he said. "And in doing so, we not only create a more seamless integration journey into the U.S., but we also jumpstart the credit building process here once you arrive."
Some industry watchers agree.
"I think that Nova Credit and similar firms provide a valuable service to consumers that live in one country but have credit history in another country," said Craig Focardi, principal analyst at Celent. "They also reduce the cost to lenders of making loans to this customer segment, which expands the lending market. For students or other recent immigrant workers, it also enables financial institutions to capture new customers earlier in their banking-needs life cycle and before competing financial institutions capture them."
This is the first time Nova Credit is taking an investment from a bank. But more bank clients are in the company's pipeline, Esipov said.
"The truth of global demographics remains that immigration is the only source of population growth in developed economies," he said. In the U.S., more than 50% of population growth comes from immigration.
"The natural-born population is in decline and immigration is the only thing that's creating any growth and filling the gap," he said. "And that's not a U.S. phenomenon; that's happening in every major developed economy. HSBC is taking a big stance here in believing that this is a demographic shift that's here to stay and they're investing behind it."
