Online lender QuadFi said it is using artificial intelligence (AI) to provide credit to immigrants in Canada. The startup claims its new solution will allow any newcomer to North America to apply for a personal loan and be approved in minutes.
QuadFi claims its credit solution is borderless and not based on FICO scores. FICO scores assess the credit risk score, which FICO claims is widely recognized as the industry standard for measuring credit risk.
“QuadFi fundamentally revolutionizes the way risk is addressed and assessed in the modern era,” claimed Nikjoo.
However, traditional underwriting and scoring models use financial histories to create a score for potential customers. This means that people with no financial history in Canada, such as newcomers and immigrants, cannot receive a fair or general score. “Therefore, their access to fair and affordable financial products is extremely limited,” explained Manny Nikjoo, CEO and co-founder of QuadFi.
QuadFi identifies what it calls top and super top customers through advanced models and alternative data, including academic achievement, income levels and open banking information. The FinTech startup uses a proprietary process to convert and consolidate credit information from overseas into North American standards.
According to QuadFi, its solution is able to identify borrowers years before they have a full credit score.
To provide the loans, QuadFi secured a financing facility of up to CAD$127 million 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 former Mastercard 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 personal loan to start life in Canada, newcomers often face limited options due to a lack of an existing financial record in the country.
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“QuadFi fundamentally revolutionizes the way risk is addressed and assessed in the modern era,” claimed Nikjoo.
QuadFi loans are capped at $50,000 and can be used for everything from paying off other high-interest debt, to education, a down payment on a home, and more. Interest rates start at 5.99 percent, and QuadFi charges no hidden fees. There is no early payment penalty either. The current average interest rate for a personal loan in Canada is 7.05 per cent in comparison.
QuadFi does not disclose the number of newcomers supported with loans to date, but Nikjoo said the FinTech is looking forward to helping thousands of newcomers move to Canada over the next 12 months.
QuadFi has contracted with various credit bureaus outside of Canada to access and translate foreign credit scores, signing agreements with companies in the United States, Mexico, Nigeria and the Philippines. The startup plans to sign more deals with other countries in the coming months.
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The FinTech startup earns revenue by charging a ‘spread’ above the cost of capital, along with a service fee from facility providers. The spread is the difference between the interest rate a bank pays to depositors and the interest it receives on loans to consumers. Nikjoo said QuadFi’s loan default rate is extremely low and below the company’s target.
Nikjoo said that as far as he knows there are no other startups in Canada that serve immigrants with loans. “What we’re doing is a paradigm shift: we’re shifting the focus of underwriting from historical data to a forward-looking approach,” he said. “Currently, there are some limited options for new market entrants and migrants. However, most of these are very expensive solutions from loan sharks and predators.”
Nikjoo noted that some government institutions offer products to newcomers and immigrants as well, but argued that the amount is limited and argued that the process of obtaining capital can be difficult, long and arduous. “Unlike these mercenary and missionary groups, QuadFi is creating a new fair and affordable solution for newcomers using technology.”
For example, the Canadian government offers loans to immigrants, but the maximum they can access is $10,000. The registered charity, Windmill Microlending, also provides loans to newcomers, but these are above $15,000.
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The BDC provides the most generous loan program, offering $25,000 to $50,000 to immigrants to help finance businesses.
QuadFi’s loan program comes at a time when some provinces have opened 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 technology sector and reduce labor shortages.
British Columbia, Alberta, Ontario and Quebec all have similar programs.
QuadFi is a certified B company. The “B” stands for “benefit for all”. To become a Certified B Corporation, signatories must demonstrate that they are purpose-driven and create benefits for the larger society. Certification is supported by an independent, rigorous and ongoing assessment process.
“As a Certified B Corporation, we are committed to leveraging our engineering and technical expertise to deliver positive social impact,” said Nikjoo. “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 a lot of newcomers really need.”
Featured image by Tom Carnegie via Unsplash.
