Matt Davies, Head of Market Development UK, Nova Credit, a cross-border credit bureau, considers the issue of immigrants and access to motor finance.
For several quarters in a row, data reports from the motor finance sector have made for uncomfortable reading. Figures published last year confirmed what many of us suspected: even a late rebound in new car sales in November is unlikely to shift the market up a gear and out of the sluggishness it’s endured since the start of the Covid pandemic.
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2023 may generate more appetising sales figures than 2022 but the UK is now in recession and the long-tail effects of this Autumn’s fiscal policy announcements are making themselves felt. And at times like these, a key strategy for many motor finance providers will be to explore and expand into new markets. Do the 10 million immigrants living in the UK hold the key?
Regardless of the complicated economic times we’re living in, these challenges are not reducing the number of people moving to the UK to work or study. With two million visas granted in the 12 months to June 2022, the number of grants issued to long-term newcomers is increasing again in the aftermath of the pandemic.
For this expanding newcomer population, credit products that are regulated, fairly priced and responsibly sourced are in high demand. Yet they are far from readily available.
Certainly, under incoming new Financial Conduct Authority rules known collectively as ‘Consumer Duty’, the attention lenders and financial services providers provide to underserved markets like that of UK newcomers will help fulfil their regulatory obligations to support all consumers to achieve their financial goals and avoid introducing foreseeable harm or obstruction.
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By GlobalDataAt Nova Credit, we believe more lenders should find ways to help immigrants access finance to buy the cars they need. The results could be gratifyingly and mutually serendipitous.
Newcomers to the UK are routinely excluded from the most basic financial services that many of us take for granted. No matter these people’s backgrounds, qualifications, incomes or savings, fairly priced car loans, credit cards and phone contracts are out of reach to them.
Millions of people cross borders every year, establishing lives in new countries to work, study or be with family. At the moment when they physically cross the border, they leave behind them years – in some cases, decades – of credit history. Their financial identities are ‘stuck’ in the countries they’ve left. Without access to these creditworthy, would-be credit active people’s past credit histories, lenders have no choice but to automatically decline their applications for new finance, or at a push offer access only to the most expensive credit products.
The Guardian reported that the most recent census confirms that 1 in 6 people living in the UK today were born overseas. This fits with Nova Credit’s own research that by 2035 100% of UK net population growth will come from immigration. Additionally, 80% of foreign-born UK residents live here for at least five years; the same proportion are of prime working age, and their mean UK income is higher than that of a UK-born national. For most lenders, there are few other underserved populations hiding so directly in plain sight.
Failing to serve newcomers is not good news for financial inclusion. Furthermore, it’s bad business for financial providers. UK lenders that don’t have a strategy to serve new-to-country applicants are on track to lose market share in the years ahead.
It would be inaccurate to lay the fault for this exclusion at the door of lenders. For decades there has been no standardised way for lenders to communicate with credit bureaus around the world, or share credit history between countries in formats and templates that one another can understand.
Whereas modern consumer technology has made so many aspects of our lives easier, faster and attainable in one click, innovation has stalled when it comes to access, digestion and transfer of our personal financial information.
A credit bureau worth its salt will make it possible for consumers and their would-be lenders to access credit history wherever it was made and use it wherever it is needed. Underpinning this is a belief in a borderless, frictionless financial system – one in which you own your financial identity, no matter where you choose to live.
More people than ever need access to fair credit products, wherever they come from and wherever they choose to live. This is an issue that can and must be addressed with a more modern, more globalised approach to an archaic, creaking credit reporting system.
Car sales may be down, but there are still buyers in the market. Many are newcomers to the UK, creditworthy and credit-hungry. Let’s unlock access to these people on an industry-wide level to keep the automotive sector moving during the challenging times ahead.
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