New UK Market Study Highlights Importance of Cross-Border Credit Solution for Newcomers

Key takeaways:

• New research by Nova Credit shows immigrants into the UK consistently wait longer and are treated differently from UK-born applicants when applying for essential credit services

• Delays and refusals stem from the lack of access financial services providers have to applicants’ credit histories ‘left behind’ in previous countries 

• More than half of UK immigrants will apply for more credit in next 12 months, with a fifth seeking mortgage finance

• UK’s 10m-strong immigrant population is a creditworthy expansion opportunity hiding in plain sight of lenders

London, 26 July 2023 - Immigrants to the UK have poorer experiences from their would-be financial services providers than UK-born counterparts as a result of their lack of available credit history, according to new research published today.

The report titled ‘10 million UK immigrants - a market opportunity hiding in plain sight,’ draws on independent research commissioned by Nova Credit, the cross-border credit bureau, and conducted among 1,000 working-age adults who immigrated to the UK within the last ten years. 

The research finds that, 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. Over 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 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 - which 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. 

Despite these challenges, the majority (59%) of immigrants start to look for a credit card within three months of moving here; 65% look for a rental property within one month; and 60% 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 2021 Census shows that 1 in 7 people living in the UK (10 million) were born overseas. More than a quarter of respondents (26%) to Nova Credit’s survey earn over £40,000 - the average UK wage - and half (45%) cite work (either their own or their partner’s) as the primary reason to move to the UK. 80% of them expect to be in the UK for at least four years, with half (50%) expecting to live here for at least a decade.

Only 1 in 10 (10%) immigrants believe access to credit has not become harder as a result of the current challenging economic conditions; and over half (55%) 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%) expect to apply for additional credit in the next 12 months, reinforcing the need for cross-border credit access; a fifth (21%) 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.”

The UK immigrant population is one of the fastest-growing demographics in the country. Every year, more than 800,000 people are granted long-term visas to work or study in the UK. This data tallies with research from the Office of National Statistics that predicts that 100% 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%), inability to afford a good enough standard of accommodation (37%) and a long commute to work or study (35%). 

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.”

Read the full report here.