Banks get another new challenger, this one catering to immigrants
Stilt, a fintech that has been providing unsecured personal loans to immigrants, this week launched a bank account for newcomers to the U.S. It will even open accounts for immigrants before they move to this country.
It joins a small group of challenger banks for immigrants. Most of them, in conjunction with banking partners, offer federally insured accounts and a debit card. There are others, like TomoCredit and Petal, that offer credit cards to new arrivals and others who lack credit scores.
Stilt is working with Synapse, a fintech that provides provides payment, deposit, lending and investment products through application programming interfaces to financial technology companies, which in turn launch consumer-facing financial services. Synapse partners with Evolve Bank & Trust, whose parent company is based in Memphis, Tenn., to deliver those banking services to Stilt and others.
Stilt says it has raised $7.5 million in equity and $100 million in debt capital.
It offers a basic checking account, a debit card and virtual cards. Soon, Stilt plans to offer immigrants lines of credit.
“They don't have any Social Security number," said CEO and co-founder Rohit Mittal. “They don't have any credit history. We will help them build credit on day one.”
If a new user does not have a Social Security number, Stilt collects additional customer identification information and documentation and requires that a tax ID is provided within a certain time frame of account opening.
Mittal himself is an immigrant from India. He was accepted to Columbia University, but when he moved to New York, he was unable to rent an apartment. He had to sleep on a Columbia alum’s couch for a few weeks because every building he looked at asked for a credit report and a large deposit.
“I had none of those things,” Mittal said. Fortunately, a roommate of a friend, Priyank Singh — who later became a co-founder of Stilt — was moving out and Mittal was able to move in.
To verify identity and open an account, Stilt requires people to take photos of their government identification, their visa, passport and anything else that proves their legal right to live in the United States. They also have to take a selfie.
Stilt can work with visas from all countries, including tourist and international student visas.
“We can even work with DACA holders, who technically are not visa holders, as refugee applicants,” Mittal said, referring to Deferred Action for Childhood Arrivals.
Once they arrive in America, Stilt will ask them to upload additional documents. For a legal address, immigrants can use the address of a friend with whom they are living or a dorm address.
Stilt says it has fraud detection and anti-money-laundering compliance controls in place.
The company starts deposit account small, with perhaps a maximum of $2,000 that is raised over time.
To assess new users’ creditworthiness, Stilt looks at financial and nonfinancial data.
“We have developed a lot of look-alike metrics,” Mittal said. “Based on the tens of thousands of applications that we have received and many thousands of loans that we have done, we have seen what customers look like very early on in their lifecycle based on different visa statuses, based on what they are doing in the U.S., and so forth.”
Stilt considers alternative data on things like education and employment to determine the amount and the term of the credit lines.
“We are able to quantitatively distinguish someone who works in a technical field at a large company from someone who's working part time as a mechanic at an auto dealership,” Mittal said. “So we are able to determine their creditworthiness, their ability to repay. And we've been refining this over the last few years now.”
If a recent graduate arrived from India, for instance, Stilt will look at any available financial data. It will also analyze how well that person did in school, their visa status, the type of industry they are in, the job they have and what they were doing before.
Stilt does not disclose the number of borrowers it has; Mittal said it is “many thousands.” Borrowers come from 150 different countries, the largest portion from India, Latin America, African countries, the Philippines, China, Canada and the United Kingdom.
People find Stilt by Googling terms like “H1B loan,” which is a reference to the name of U.S. visas for specialty workers.
“Our cost of acquisition is really low, and we have a fairly dominant position in [search engine optimization] for immigrant-related content,” Mittal said.
Since the coronavirus pandemic started, Stilt has been trying to help its borrowers in any way it can, including charging no interest or fees.
Its delinquency rates have been in the low single digits, Mittal said.
“We are constantly monitoring and tracking our performance, including early delinquencies, and we don't see a big impact because of the current crisis,” he said. “What we have seen is most of the immigrants are employed and hardworking. So even if they are negatively impacted, they try their best to find alternative employment and still meet their financial obligations.”