Online lender QuadFi said it is using artificial intelligence (AI) to provide credit to immigrants to Canada. The startup claims its newly launched solution will allow any newcomer to North America to apply for a personal loan and be approved within minutes.
QuadFi claims its credit solution is borderless and doesn’t rely on FICO scores. FICO scores assess credit risk scoring, which FICO claims are widely recognized as the industry standard for measuring credit risk.
“QuadFi is fundamentally revolutionizing how risk is viewed and assessed in the modern era,” Nikjoo claimed.
However, traditional underwriting and scoring models use financial histories to create a score for potential customers. That means individuals with no financial history in Canada, such as newcomers and immigrants, aren’t able to obtain a fair score, or a score in general. “Hence, their access to fair and affordable financial products is extremely limited,” explained Manny Nikjoo, CEO and co-founder of QuadFi.
QuadFi identifies what it refers to as prime and super-prime customers through advanced modeling and alternative data, including academic achievements, income levels, and open banking information. The FinTech startup uses a proprietary process to convert and integrate credit information from overseas to North American standards.
According to QuadFi, its solution is able to identify the borrowers years before they have a full credit score.
In order to provide loans, QuadFi secured a financing facility of up to $127 million CAD from CrayHill Capital Management in April. In total, the 20-person startup has raised $140 million in equity and debt. QuadFi announced in 2021 that it had received strategic investments from Ritu Banga—the wife of Mastercard’s former CEO and current executive chairman, Ajay Banga—and Bruce Simpson, CEO of the Stephen A. Schwarzman Foundation and former managing director of McKinsey Canada.
Nikjoo told BetaKit that when trying to secure a credit card or a personal loan to get their lives started in Canada, newcomers are often met with limited options because of a lack of an existing financial record in the country.
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“QuadFi is fundamentally revolutionizing how risk is viewed and assessed in the modern era,” Nikjoo claimed.
The ceiling on QuadFi’s loans is $50,000, and can be used for everything from paying down other high interest debts, to education, down payment on a home, and more. Interest rates start at 5.99 percent, and QuadFi doesn’t charge any hidden fees. Nor is there an early payment penalty. The current average rate for a personal loan in Canada is 7,05 percent by comparison.
QuadFi doesn’t disclose the number of newcomers it’s supported with loans to date, but Nikjoo said the FinTech is looking forward to helping thousands of newcomers moving to Canada over the next 12 months.
QuadFi has signed contracts with several credit agencies outside of Canada to access and translate foreign credit scores, inking deals with firms in the United States, Mexico, Nigeria, and the Philippines. The startup plans to enter into more deals with other countries in the months ahead.
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The FinTech startup earns revenue by charging a “spread” on top of the cost of capital, along with the service fee from the facility providers. A spread is the difference between the interest rate a bank pays to depositors and the interest rate it receives from loans to consumers. Nikjoo said the QuadFi’s default rate on loans is extremely low and under the firm’s target.
Nikjoo said that to his best knowledge there are no other startups in Canada serving immigrants with loans. “What we are doing is a paradigm shift: we are changing the underwriting focus from historical data to a forward looking approach,” he said. “Currently, there are some limited options for newcomers and immigrants in the market; however, most of them are very expensive solutions from shark lenders and predatory ones.”
Nikjoo noted some government institutions offer products to newcomers and immigrants as well, but argued that the amount is limited and claimed the process to obtain funds could be difficult, long and cumbersome. “Unlike these groups of mercenaries and missionaries, QuadFi is creating a new fair and affordable solution for newcomers by utilizing technology.”
For example, the Canadian government offers loans to immigrants, but the most that can be accessed is $10,000. The registered charity, Windmill Microlending, also provides loans to newcomers, but those top out at $15,000.
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BDC provides the most generous loan program, offering $25,000 to $50,000 for immigrants to help fund businesses.
QuadFi’s lending program comes at a time when a number of provinces have opened up immigration streams to attract talent to tech startups. As part of the Saskatchewan Immigrant Nominee Program (SINP), the Tech Talent Pathway was created in March to support Saskatchewan’s growing tech sector and to ease labour shortages.
British Columbia, Alberta, Ontario, and Québec all have similar programs.
QuadFi is a Certified B Corporation. The “B” stands for “benefit for all”. For a company to become a Certified B Corporation, signatories must demonstrate they are purpose-driven and create benefits for broader society. Certification is backed by an independent, rigorous, and ongoing assessment process.
“As a Certified B Corporation, we are committed to leveraging our engineering and technical expertise to provide a positive social impact,” Nikjoo said. “Our company focuses on financial inclusion because its benefits are widespread, and obvious. From a product perspective, we started with credit because that’s what many newcomers really need.”
Feature image by Tom Carnegie via Unsplash.
