In an era of unprecedented global mobility, national financial systems must adapt to welcome newcomers. However, the immigrant journey, often fueled by aspirations, is frequently met with the harsh reality of financial exclusion. Drawing from our own experiences as immigrants to Canada, we’ve felt the financial hurdles faced by newcomers.
Laviva, who moved from Bangladesh to Montreal in 2011 to attend McGill University, recalls the pain of transferring money into the country, figuring out the unfamiliar credit systems, and tripping over banking-product confusion. Since she couldn’t open a Canadian bank account from Bangladesh, she was forced to carry cash and travellers cheques. Seamlessly transferring money for tuition and living expenses was nearly impossible. It took a year before she could qualify for a credit card, and with that, only a $500 limit was possible. It was barely enough for books and groceries. Trial and error in the banking system was the only way through.
When Khrystyna made her hasty journey from Ukraine to Toronto in 2022, she was already familiar with solutions like Wise to facilitate a cash injection into Canada. But opening a Canadian bank account to receive the funds was another story. With basically no identity in Canada, achieving the basics was like a cat chasing its own tail: getting a checking account, submitting rental applications for housing, co-sign requirements, and high up-front deposits. Her new home didn’t feel so welcoming right away.
Credit history portability, or lack thereof, is the root cause of a newcomer’s poor experience. To the Canadian banking system, an immigrant is the same as a green flamingo: unfamiliar and untrustworthy. This gap often results in immigrants being unfairly categorized as “high risk” in various financial applications, pushing them towards predatory lenders who charge exorbitant interest rates, limiting their access to essential financial products, and ultimately increasing their financial vulnerability. Furthermore, cultural and language barriers, along with the lack of a familiar support system to guide newcomers through local financial practices, often leave them unable to navigate the Canadian financial system alone. This isolation can breed mistrust in traditional banking institutions, as immigrants may struggle to understand unfamiliar products and services. This lack of understanding can also drive newcomers towards community-saving groups or other informal alternatives, which may not offer the same protections or benefits as regulated financial institutions.
Why Does this Matter?
Canada is the fastest-growing G7 nation, driven primarily by immigration. Just between July 2022 and July 2023, the Canadian population increased by over a million people, with new immigrants and non-permanent residents accounting for 98% of this growth. As of now, immigrants represent over 23% of the total population (nearly 9 million people), a figure projected to rise to 52% by 2041, potentially doubling Canada’s population within 25 years.
This demographic shift, a clear marker of Canada’s proactive measures to address the challenges of an aging workforce and labor shortages, is transforming the country into an increasingly diverse nation. It is also reshaping the financial landscape, challenging the traditionally slow-moving sector to adapt and innovate in order to meet the diverse needs of this growing population.
Fintech solutions aimed at immigrants either help people before they move to Canada, or after. Let’s explore both types of offerings.
Pre-Immigration Solutions
Imagine a young student in India, eager to start a new life in Canada. Once her visa is secured, she turns to Passage, a newly funded platform with $40 million CAD, which matches international students and immigrants to Canadian workforce needs and connects them with financing opportunities. She also benefits from Beacon‘s comprehensive financial services, which allow her to open and use a deposit account pre-arrival (while still in India) and facilitate fast, easy international remittances.
Thanks to these coordinated fintech solutions, she arrives in Calgary with most of the financial tools and support needed to thrive in her new environment.
Post-Immigration Solutions
Upon arrival, she needs to establish credit, find suitable housing, and manage her finances according to her beliefs.
Nova Credit, which recently expanded to Canada, converts her foreign credit information into scores recognized by local lenders and financial institutions. This helps her establish a credit history and access financial products tailored to her needs.
For housing, SingleKey assists landlords in selecting suitable tenants and managing rental risks. Their partnership with Nova Credit simplifies the rental process for newcomers by validating the reliability of international students and immigrants, reducing default risks without needing a guarantor.
To manage her finances in line with her beliefs, she turns to Manzil, Canada’s first digital Islamic “Bank”. Manzil offers a holistic approach to financial services, providing mortgages, wealth management, wills, and credit cards that adhere to Islamic values. Non-Muslims can also benefit from Manzil’s ethical, interest-free financial solutions.
These solutions help our student transition smoothly and successfully start her life in Canada.
The Road Ahead: Challenges and Opportunities
This rapidly evolving sector is not only a new frontier for Fintech but also a beacon of hope for immigrants as they navigate their new financial landscapes in Canada. It marks a crucial step towards a future where financial barriers are dismantled, and economic opportunities are equally accessible to everyone.
At Luge Capital, we believe in the power of original thinking and the potential of immigrant-focused financial products. This is not just an area to pay attention to, but an exciting space to invest in. By supporting and investing in these solutions, we can contribute to a more inclusive financial ecosystem that benefits everyone.
Co-authored by Khrystyna Penyk and Laviva Mazhar of Luge Capital.
Khrystyna is an Investment Analyst at Luge Capital where she sources new investment opportunities, participates in due diligence, manages transactional matters, and provides ongoing support to Luge portfolio companies.
Laviva is a Principal at Luge Capital where she sources for new fintech investment opportunities, conducts due diligence, executes end-to-end transactions, supports portfolio companies and helps develop the firm’s investment thesis.
