By Daniel Lanyon on Wednesday 29 June 2022
AltFi talks to the boss of US fintech Nova Credit about his ambitions for a borderless financial system.
Speed is one of the key pillars of start-up success but some problems tackled by fintechs are harder and more laborious than others.
Helping immigrants port their financial history is the core focus for Misha Esipov, CEO and co-founder of Nova Credit. It took a number of years to build the capability and had not ever previously been tackled by any incumbent in decades.
In the nearly six years since the San Francisco-based company launched, it has now moved out of its original US market and has set up shop in the UK as part of a planned wider European launch.
“We've effectively stitched together the world's credit reporting systems and in doing so have the potential to stitch together the world's consumer lending market,” Esipov told AltFi.
“That is the long-term thesis of the businesses. To help power a more borderless financial system.”
“All of us can buy products on Amazon and Alibaba all around the world, but we still can't buy financial products from all around the world. We can't bank and borrow anywhere in the world, we're limited to our home country.”
The grand ambition of Nova Credit makes sense but is some way off. To start with Nova has focused on the US’s immigrant community who often find themselves unable to access the broader market for domestic financial services owing to a lack of a US credit history.
This means enabling American Express (a current customer) or any other bank or fintech to access a global patchwork quilt of foreign credit bureau data so that they can approve immigrants who are otherwise “credit invisible,” as Esipov puts it.
“We are an enabler that allows them to access this information that would otherwise take them six years to tap into and build these partnerships, everything that we've done around the world, and that's something that they can do as a service in a matter of days,” he said.
This means a person’s financial identity and credit history can move with them around the world the same way that you can move around the world with a passport.
The Russian invasion of Ukraine is one such pertinent and real-world example, says Esipov, himself a child immigrant to the US from Russia.
“There's a huge need given the Ukrainian refugee crisis for this [bureau ]information to be able to be used to accompany this population, as they move into Europe in search of refuge.”
“We want to support the broader financial system and being able to allow someone to arrive and be treated the same way that they would have been treated had they lived there their whole life”, he adds.
Why did no one else do it?
Nova sees itself as a global credit bureau, something that bizarrely doesn’t already exist, despite a raft of major incumbents with plenty of money to spend.
Esipov says it took a “healthy dose” of naive optimism to be able to assemble the business and its core product from idea to reality.
“I think everyone knows just how hard it is to solve. Anybody who I previously spoke with from the credit bureau industry when we were just getting started said “This is too hard. Who are you to think that you can pull this off?”
“There's no other company in the world that is singularly focused on solving this problem in this way. None of the incumbents were well-positioned to solve it.
A map of the world's credit reporting system, he explains, would be “dizzying” because it's incredibly fragmented. there's no one that has all 200 countries of the world.
Part of what allowed Nova to emerge is its partnerships with all the industry players including smaller local bureaus. This positions the company, Esipov says, with a Switzerland-like status that has allowed Nova to assemble more credit bureau data connectivity than the bureaus themselves.
“It is an industry market structure problem that has forever existed, that was only ripe for the taking for a brand new entrant. That’s us.”
“If you peel back the onion, it is driven by the fact that the local credit bureaus don't know who you are when you first arrive. The credit reporting industry has not figured out how to crack this problem. Over the last six years, we've solved it.”
The way the Nova team did this, Espiov says, is by going around the world and “physically signing partnerships with all the major credit bureaus in every major market that contributes to global immigration”.
This means Experian, Equifax, and TransUnion, i,e the best-known players in the US and Europe as well as about 20 different country-specific credit bureaus.
“Through those partnerships, we can access over a billion consumer credit files in real-time.”
“That means over a billion consumers who authorise us, we have the ability to access their individual records from wherever they're from, and use that record in whatever way that the consumer directs us to.”
Nova has not only built relationships but also technical integrations, that allow it to extract data from India, Nigeria, Kenya, UK, Brazil, Canada, Korea, Singapore and many other countries. This is then standardised into one single global standard.
“We call that the credit passport. Your credit passport is how you access financial services on a global basis as you move around the world,” Esipov said.
That product is not just an idea. It's been live in the US market for a few years, and Nova has we're partnered up with some of the largest financial institutions in the world including American Express, Verizon and Sofi.
Student lending, credit cards, apartment leases and most recently in auto and telecoms categories are the bread and butter use cases but Esipov’s bolder ambition is clear.
Nova Credit last raised money from investors via a $50m series B round led by Kleiner Perkins in February of 2020.
Canapi Ventures, General Catalyst, Index Ventures and Nyca Partners, Avid Ventures, Endeavor, Susa Ventures and Sound Ventures as well as baseball legend Alex Rodriguez and the Edge of U2 are also investors.
The company is currently going through the formal processes to secure a license with the UK regulator the Financial Conduct Authority and is growing on two fronts.
The first is our bringing its ‘passport’ capability to the international markets, including the UK.
“The UK is a natural next step for us. We want to be able to serve every major immigrant corridor all around the world.”
“We want to enable all the major British banks and global banks and a new wave of fintech players to leverage this capability that we've spent five-plus years developing in service of the millions of people who move around the world every year.”
A taste of its future plans came in the shape of Cash Atlas, its new credit underwriting solution that enables other companies to lend using open banking and bank transaction data.
“We're starting with supporting people who are physically moving, but the long-term direction of the business is to really help create a more globalised financial system,” Esipov said.
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