New to Canada | New to Credit: 2023 Lenders Summit
Continue the conversation and explore the latest in New-to-Canada technology and innovation at the 2024 Bankers Summit in May
In the dynamic landscape of finance, the New-to-Canada segment has emerged as a strategic focus for lenders, as discussed in the insightful panel at the 2023 Lenders Summit. The discussion, led by industry leaders from TransUnion, MPOWER, and Nova Credit, delved into the challenges and opportunities inherent in serving immigrants and international students arriving in Canada. Let’s explore the key takeaways and valuable insights shared during the first and second halves of the panel.
The Landscape: A Breeding Ground for Opportunities
In the grand tapestry of Canada’s future, the federal government has charted an ambitious course. Over the next three years, plans are in motion to welcome over 1.5 million new immigrants. A staggering number, right? Well, if you chat with the big players in the banking and lending sector, they’ll tell you – this is a game-changer. It’s strategic, it’s vital, and it’s one of the most important segments in their playbook.
However, here’s the plot twist: while everyone is pumped about this prospect, the existing policies and processes aren’t exactly rolling out the red carpet for these newcomers. If you’ve had a conversation with recent immigrants, you might have heard tales of navigating hoops and settling for credit lines that don’t quite match their financial profile.
Bridging the Gap: A Call for Financial Inclusion
This is where the plot thickens. From the standpoint of financial inclusion, there’s a glaring issue. A sizable and growing segment of the population is, to some extent, shut out from the financial products they rightfully deserve. Enter the opportunity for lenders – a chance to be the bridge over troubled waters.
Cue the excitement as we introduce a powerhouse panel at the forefront of innovating solutions to address this financial gap. From left to right, meet Matt from TransUnion, Misha from Nova Credit, and Manu from MPOWER. These are the minds actively shaping the landscape for new Canadians.
Customer Journey: The Moment that Matters
Picture this: immigrants arriving in Canada, filled with dreams and aspirations. What do they need? Financial products – bank accounts, credit cards, auto loans. It’s a pivotal moment in their journey, and being the lender to step in at this juncture isn’t just a transaction; it’s an opportunity to build lasting loyalty and stickiness over time.
To shed light on the international perspective, Misha from Nova Credit takes the stage. He brings to our attention the colossal demographic shift expected in Canada’s population over the next few decades. With a unique vantage point, he emphasizes the need for a dedicated strategy to attract and retain the “New to Canada” segment.
Insights from the Trenches: Research and Realities
Matt from TransUnion, a heavyweight in credit bureaus, chimes in with insights gleaned from extensive research. He emphasizes the palpable appetite for credit among new immigrants. They’re eager, they’re ready, but they often face roadblocks. Despite this, once granted, their credit behavior often outshines that of established Canadians.
But here’s the catch – there’s a low level of loyalty. These newcomers, when faced with rejection, seek credit elsewhere. It’s a downside for their customer experience, but for lenders, it’s a gold mine of opportunity to establish loyalty from the get-go.
International Students: A Unique Perspective
Manu from Empower shifts our focus to the specific needs of international students. With their distinctive earning curves and immediate needs for education loans, these students present a unique set of challenges and opportunities. The nuances in their financial journeys underscore the importance of tailored solutions.
Breaking Down Barriers: The Quest for Financial Inclusion
As the panel unravels barriers faced by new Canadians, it becomes clear that traditional onboarding processes fall short. From the lack of relevant form fields to identity verification challenges, the journey is far from seamless. Misha, drawing on global experiences, highlights the necessity for a data-driven approach to overcome these barriers.
Connecting the Dots: The Third Bureau Concept
The conversation kicked off with a unique perspective from one of the panelists, who likened their role to the “third bureau.” Working closely with TransUnion and Empower, this innovative approach allows partners instant real-time access to the world’s credit bureau system. By collaborating with bureaus globally, including subsidiaries of TransUnion and other independent bureaus, lenders gain access to highly reliable credit data through a single API. The goal is to transform the customer segment from invisible to visible, enabling lenders to enhance digital channels and improve approval rates from the moment individuals arrive in Canada.
Navigating Regulations for New Immigrants
Acknowledging the highly regulated nature of the lending business, the panelists discussed the importance of navigating different policies and regulations designed with immigrants in mind. Emphasizing their commitment to compliance, one panelist shared their approach to investing significant time and capital to establish themselves as a regulated bureau in every province in Canada. This strategic positioning enables them to partner with various lenders, both traditional and non-bank, to better serve the New-to-Canada market.
Challenges in Lending to Newcomers
The conversation shifted to the challenges lenders face when dealing with newcomers, given the lack of credit history and the limitations of existing policies and processes. The panelists emphasized the need for lenders to focus not only on the acquisition of new customers but also on managing them through their lifecycle. The key is to understand the potential of these customers, who may have limited credit histories initially but possess significant lifetime value.
Leveraging Alternative Data for Informed Decision-Making
To address the barrier of thin credit files, the panelists highlighted the significance of leveraging alternative data and analytics. Beyond traditional credit scores, alternative data sources include educational data, employment history, financial data from abroad, and even social media information. By adopting advanced modeling, AI, and machine learning, lenders can gain insights into the potential of newcomers and make informed decisions regarding their creditworthiness.
The Role of Identity and Fraud Management
One panelist emphasized the importance of identity algorithms and fraud management in assessing the risk associated with New-to-Canada customers. By developing advanced identity algorithms, lenders can better identify individuals and separate genuine customers from potential fraud. This proactive approach helps mitigate risks associated with the lack of credit history.
Building Lifetime Value with Newcomers
The panel concluded with a focus on building lifetime value with New-to-Canada customers. Lenders were advised to invest in tools and technologies that enable early acquisition, allowing them to establish a multi-relationship with customers upon arrival. By providing a range of financial products and services, lenders can capture a significant portion of the customer’s lifetime value during the crucial initial phase.
The “New-to-Canada” panel at the 2023 Lenders Summit offered valuable insights into the evolving landscape of serving immigrants and international students in the Canadian financial market. As the industry continues to adapt and innovate, there is a growing recognition of the strategic importance of this customer segment, emphasizing the need for lenders to invest in technology, alternative data, and regulatory compliance to unlock the full potential of the New-to-Canada market.