Europe Insights Paytech

Current Economic Challenges are Restricting Immigrants From UK Credit Services

Immigrants to the UK have poorer experiences from their would-be financial services providers than UK-born counterparts. This is as a result of their lack of available credit history, according to new research published by Nova Credit, the cross-border credit bureau.

The report titled 10 million UK immigrants – a market opportunity hiding in plain sight, looked at 1,000 working age adults who immigrated to the UK within the last ten years.

The research finds that, for two in three (66 per cent) immigrants, the process to receive credit products takes longer than it should due to applicants’ lack of UK credit history. Over half (55 per cent) feel that lenders and financial services providers treat them differently due to their lack of UK credit history. An even higher proportion (59 per cent) have been told by lenders and financial services providers that they would be treated differently.

Only one in four (26 per cent) of immigrants who moved to the UK in the last ten years have experienced fully online processes to access credit products and services.

There is a significant disparity between the experience of credit applicants who have newly arrived in the UK, and people who have lived and worked in the UK for many years. This imbalance arises when an individual moves to a new country, leaving their credit history behind in their previous country.

Without access to this credit history, lenders must either automatically decline the application, or manually process immigrants’ applications for new finance. This often ends in a decline as well. Gaining access to an applicant’s previous credit history provides lenders a more accurate view of a consumer’s financial situation.

The lack of visibility into previous credit history means that immigrants often wait longer or pay more to receive the essential credit products and services they require to establish their new lives in the UK, such as credit cards, car finance or phone contracts.

Looking for a credit card despite challenges

Despite these challenges, the majority (59 per cent) of immigrants start to look for a credit card within three months of moving to the UK. Sixty-five per cent look for a rental property within one month; 60 per cent seek mobile phones within a week.

Collin Galster, non-executive director of Nova Credit UK, comments: “The widespread adoption of online, automated application, underwriting, and approval processes have transformed the experience of British residents seeking credit.

“Unfortunately, these improvements haven’t reached the millions of people each year who cross borders to establish new lives overseas. This isn’t the fault of lenders themselves, but a result of credit reporting systems that were built within national siloes – systems that fail to meet the needs of an increasingly globalised and integrated world.”

The current economic crisis’ impact on access to credit

The 2021 Census shows that one in seven people living in the UK (10 million) were born overseas. More than a quarter of respondents (26 per cent) to Nova Credit’s survey earn over £40,000 – the average UK wage. Half (45 per cent) cite work (either their own or their partner’s) as the primary reason to move to the UK. Eighty per cent of them expect to be in the UK for at least four years, with half (50 per cent) expecting to live here for at least a decade.

Only one in 10 immigrants believe access to credit has not become harder as a result of the current challenging economic conditions. Over half (55 per cent) worry that, in light of these conditions, any further credit applications they make will be refused on account of being a newcomer with limited UK credit history.

Despite these concerns, more than half (53 per cent) expect to apply for additional credit in the next 12 months, reinforcing the need for cross-border credit access; a fifth (21 per cent) of these will require credit in the form of mortgage finance specifically to buy new homes.

Matt Davies, head of UK market development at Nova Credit, adds: “The UK immigrant population is a fundamentally crucial market segment for UK financial services to serve in a better way. These are creditworthy, credit-hungry individuals who constitute a market opportunity hiding in plain sight from lenders and other credit providers continually seeking new market segments.

“Serving underserved communities like UK newcomers doesn’t just solve for financial inclusion. It is socially responsible while creating vast business growth potential for the lenders that take the plunge.”

Levelling the playing field

The UK immigrant population is one of the fastest-growing demographics in the country. Every year, the UK grants long-term visas to work or study to more than 800,000 people. This data tallies with research from the Office of National Statistics that predicts that 100 per cent of the UK’s annual net population growth will come from immigrants by 2035.

The data-driven report also explores the emotional and lifestyle impacts of credit difficulties on UK newcomers. For those interviewed for the research, the greatest impact of these difficulties accessing credit were: a feeling of isolation and difficulty making friends (39 per cent), inability to afford a good enough standard of accommodation (37 per cent) and a long commute to work or study (35 per cent).

Davies concludes: “The incoming Consumer Duty directive from the FCA marks a golden opportunity to level the playing field and address how well UK financial services are treating a huge population of people living, working, and contributing socially and economically to the country. Without doubt, responsible lenders are treating their customers fairly, but Consumer Duty may help spark greater innovation that make the experience consumers receive more equitable regardless of their backgrounds.”

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