There is a burgeoning industry of immigrant-inclusive financial services in the UK, writes Misha Esipov, Founder and CEO, Nova Credit.
We’re entering an extraordinary, challenging economic environment - the likes of which many in the fintech sector won’t have experienced in their working lives before.
A recession is starting to feel like an inevitability - one that will be compounded by record inflation, soaring interest rates, geopolitical unrest and an affordability crunch that could last several years.
Counterintuitive though it may seem, against this gloomy backdrop - or even in spite of it - immigration into the UK is on the rise. People continue to enter the UK to establish or further their working or academic lives here.
The border closures caused by Covid are falling away and even with Brexit measures now in place, government figures are showing signs of a return to pre-Covid immigration levels.
People from all parts of the world choose to come and work or study in the UK for several years at a time - four in five stays for longer than five years. The vast majority of these newcomers are skilled, qualified or professional, and add to and enrich the tapestry of both our society and economy.
At a point when many British people are battening down the hatches on their budgets, and UK banks are imposing tighter stress tests and affordability assessments on their customers, it is uplifting to see the re-emergence of this population of creditworthy, credit hungry and would-be credit active people.
An underserved market
Now as we seek authorisation with the FCA to operate in the UK, there is a burgeoning industry of immigrant-inclusive financial services that feels almost unique relative to the rest of Europe.
Whether it’s Prodigy Finance whose loans help international students settle more securely into their new universities or business schools, Yonder’s credit card that doesn’t require a credit score, or Revolut and Wise who have transformed what we can all expect from our cross-border financial services, UK-nurtured fintech is leading the way in Europe to create better financial wellbeing for newcomers to the country.
For more than a decade, London has been a fintech capital of the world with its enviable, rare convergence of finance, technology and academic excellence. Layered on top of this is London’s diverse immigrant community. One in three newcomers to the UK makes their home in London.
Such proximity to financial innovation and hands-on appreciation of the challenges that newcomers face is creating a flourishing immigration-focused innovation ecosystem.
But not only that. In UK fintech, so close are our startups situated amongst the heavyweight financial services players, they innately appreciate financial inclusion is not a nice-to-have, but a prerequisite for a long-term growth strategy.
The UK is already home to 10 million immigrants today and every year that number grows, as more than 700,000 credit-worthy individuals are granted long-term visas to enrich communities with cultural diversity, to work or study, and to contribute to the country’s economy. Working out how best to serve this rising population of people who traditionally are excluded from basic financial services needs to become a priority for the financial services industry.
While their products expand and thrive to bring greater financial inclusion to a wider pool of people, startups like those above acknowledge that continual growth and market share accretion are integral to financial services lenders’ ability to compete domestically and internationally.
Lenders, like almost any other type of enterprise, are continually searching for new markets to serve because that’s where and how growth is achieved. The immigrant population is one such market - but one that’s stubbornly out of reach. Fintechs are forcing and creating change here.
As other borrower markets contract, the creditworthy immigration population is only becoming larger. For those financial services players that can or do serve this community, the rewards could be enormous - perhaps more so now than at any other time in recent history.
Sceptics have been quick to suggest that immigration is a ‘niche’ market segment; they predict financial service players that service it will be stymied by its limited capacity. But steer away from the hyperbole and delve into the facts, and such cynicism can be refuted by two clear certainties.
First, immigration is a global fact of life. The transition of people between countries and cultures for economic, social and cultural reasons is as old as civilisation itself.
Take the UK alone, where by 2035, immigrants will account for 100 per cent of the country’s net population growth. Four in five foreign-born UK residents live here for at least five years; the same proportion are of prime working age, and their mean UK income is higher than that of a UK-born national.
For most lenders, there are few other underserved populations hiding so directly in plain sight.
Second, creating financial services for immigrants is a tough nut to crack. The barriers to entry are high, but the bounties are plentiful. For those that succeed in creating financial parity for immigrants in the societies they live in, the capacity to adapt and expand models to eliminate the financial exclusion for other underserved, creditworthy markets is there.
The time is now for immigrant-focused financial services innovation like we’ve never before seen. Fleet of foot and disruptive by nature, fintech can and must dominate this strangely nascent market where incumbent players have until now failed to tread.
The views and opinions expressed are not necessarily those of AltFi.
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