Credit Beyond Borders: How to Underwrite Newcomers to Canada

Abstract: The 2024 CLA Lenders Summit Panel, “Credit Beyond Borders: How to Underwrite Newcomers to Canada,” examines strategies for addressing the financial needs of Canada’s growing newcomer population. Experts from Nova Credit, BMO, and RBC discuss solutions like the Credit Passport, tailored banking products, and financial literacy initiatives. The discussion highlights the demographic and economic impact of immigration, challenges in underwriting limited credit histories, and the long-term profitability of serving this key segment.

Impact of Population Growth on the Canadian Economy

Christopher: How would you compare the population growth in Canada and its economic impact?

Colin: Unlike the U.S., newcomers in Canada constitute a much larger share of the population, with 100% of population growth driven by immigration. This focus on newcomers makes Canada unique among OECD countries. By providing tools like the Credit Passport, we aim to help newcomers access credit seamlessly and avoid starting from scratch.

Opportunities and Challenges Serving New Canadians

Christopher: Thank you, Colin. Amit and Sumit, as representatives of Canadian banks, how do you view the opportunities and challenges with serving newcomers?

Sumit: At BMO, we see tremendous opportunity in serving newcomers, as immigration drives population and labor force growth. We’ve developed post-arrival and pre-arrival products and partnered with Nova Credit to offer solutions like the Credit Passport. While challenges remain—such as navigating cultural differences and varying financial histories—we believe immigration will continue to fuel Canada’s growth.

Amit: I agree. Newcomers are not a monolithic group but a collection of micro-segments, each with unique needs. For example, permanent residents may seek stability and long-term products like mortgages, while others might prioritize short-term financial tools. Education on Canadian financial systems is critical since concepts like credit scores can be unfamiliar to newcomers.

The Role of Government Policy on Business Strategy

Christopher: Colin, could you elaborate on the role government policy plays in your strategy?

Colin: Absolutely. Nova Credit operates on a consumer-permission model, allowing individuals to access and transfer their credit data internationally. This aligns with evolving global privacy regulations that emphasize consumer control. While government interventions like immigration policy shifts may affect the volume of newcomers, the demographic trend remains robust. Our goal is to provide newcomers with financial tools that integrate seamlessly with their journey.

Financial Institutions and Their Underwriting Process for New Canadians

Christopher: Amit and Sumit, how do your banks address the challenge of underwriting newcomers with limited credit history?

Amit: We’ve made significant progress with products tailored for newcomers, such as unsecured credit cards and newcomer-focused mortgage programs. The key is enriching these offerings with more data to make better decisions. Partnerships with companies like Nova Credit provide valuable insights, but there’s still room for innovation.

Sumit: I’d add that educating newcomers on Canadian financial systems is vital. For example, explaining the importance of building credit history through tools like secured credit cards can help them integrate faster. It’s about creating a comprehensive strategy that serves their needs holistically.

Return on Investment When Serving New Canadians

Christopher: Finally, what are your thoughts on the ROI of serving newcomers?

Sumit: Newcomers represent a profitable segment, though the payback period can be longer. However, they are critical to long-term growth, and we see value in investing in their success. Their aspirations—like homeownership and education—align with our offerings, making them a key part of our strategy.

Colin: I agree. The question isn’t whether to serve newcomers but how effectively you can do so. Tools like the Credit Passport provide a complete data set, enhancing decision-making and outcomes for lenders and newcomers alike.

Christopher: Thank you all for your insights. This has been an engaging discussion. Let’s continue exploring ways to support newcomers and foster their success in Canada. Thank you to the Canadian Lenders Association for putting on this panel!

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