Newcomers to a country are facing an uphill battle – not only are they adjusting to a new culture and environment, but they are also disadvantaged in knowledge about and access to fair and affordable financial products. This is mostly due to their lack of credit history in the new country, so banks and other financial institutions deem the newcomers as a default risk that they are unwilling to accommodate.
Toronto-headquartered fintech company QuadFi was created to solve this problem. Its founder, serial entrepreneur Manny Nikjoo, is a first-generation immigrant who first arrived in Canada in 2006 to obtain his Master’s degree and create a better life for himself. He eventually gained his PhD in electrical and computer engineering, focusing on AI, from the University of Toronto, and later worked as an investment banker and in private equity.
“Right off the bat, I noticed it's not a fair battle. It's incredibly difficult for a newcomer in North America to get access to most financial services. For one year, I couldn't even get a simple credit card. I couldn't rent a car, I couldn't rent a place, and I couldn't even book a hotel room. Even if you can afford it, they want a credit card to secure it. It was really awful that I had to live on cash for such a long period of time. So, I promised myself that when I get the chance, I'm going to solve this problem for future newcomers,” Nikjoo said.
According to Nikjoo, recent developments in financial technology and AI have made that possible. QuadFi’s system works differently from the traditional credit score modeling used by many credit bureaus worldwide, which rely on historical performance that newcomers to a country do not have. He adds that these “broken” systems do not take into account how much the person is currently earning and solely focus on how they treated liabilities and debt in the past.
Thus, he concluded that the only way newcomers would be able to compete would be to create something that was forward-looking.
“Many newcomers have a bright future, so we have to bank on that bright future by designing something that they can predict their future cash flow and other forward-looking metrics, and based on those, we find the probability of default,” Nikjoo says.
To solve this problem, QuadFi borrows from the methodologies of other industries, including investment banking. In the past, valuation in investment banking was asset-based, and, later, future cash flow/discounted cash flow (DCF) became the industry standard.
Using AI, QuadFi estimates how much income a newcomer is going to have by using several inputs, including their education, their English proficiency, their profession in their home country, whether they have a family member in the new country, and many more. Based on that, QuadFi’s system estimates how much a person is making, on top of individual level and micro level information. It looks at macro level information such as the unemployment rate and growth rate in the industry the person is working in. In a sense, QuadFi emulates a hedge fund in calculating the risk of default, but on a personal level. It then assigns a score, which is the probability to default and determines how much in financial products the newcomer can access.
QuadFi’s first offering is personal loans, which is one of the most needed products for newcomers. This allows them access to much-needed cash and paying off this loan helps them build their traditional credit score. Last year, the company secured a new financing facility of up to US$100 million with a New York-based private credit manager.
“Over the past few years, we noticed that one of the most important challenges newcomers face, aside from access to financial products, is financial literacy. They're not familiar with the way the scoring system works in North America and they don't know how to build their score. It's quite complex even for someone who’s been living here for a long time, but even more so for newcomers,” he says.
With recent advancements in generative AI and large language models, QuadFi is working on an AI-based advisor that will help guide newcomers in navigating the complex financial system of their new country, focusing on four financial aspects – budgeting, setting long-term financial goals, credit building, and access to capital.
QuadFi’s AI advisor can help newcomers monitor their personal spending habits, help them save up for their own house or their children’s education, and provide easier access to financial products that will be beneficial in building their credit history and opening up further financial avenues to them. Additionally, the advisor will be available in a wide variety of languages, allowing users to understand financial concepts in a language that represent their cultural and geographic identity, also known as their heart language.
“It’s very difficult to start a new life in a new country, and it usually takes three to five years for a newcomer to become fully adapted and have a sufficient credit history. During that period, it is extremely difficult to navigate the education, job, and property markets, because they are crippled by the traditional system. From facing hardships as a first-generation newcomer to fueling change, we are on a mission to ensure no one else experiences the same financial struggles. Our great mission is to build a better, more inclusive financial future together!’ Nikjoo says.
Media contact:
Name: Manny Nikjoo
Email: [email protected]
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