SelfScore CEO Kalpesh Kapadia knows America is a land of opportunity, for that is what drew him here 20 years ago to earn a degree in industrial engineering at the New Jersey Institute of Technology and an MBA from Carnegie Mellon University.
But Mr. Kapadia quickly learned that opportunity is not equal for all. Even though more than one million international students are admitted to campuses each year, most do not gain similar acceptance from America’s credit providers.
That is a shame because international students contribute more than $31 billion to the American economy every year.
Totals like $31 billion also scream opportunity, and Mr. Kapadia and his partner Michael Hallinan want to meet that opportunity by providing the first MasterCard designed specifically for international students. By employing unique analytic methods and data sets such as education, tuition funding source and career prospects, SelfScore identifies creditworthy international students who are often labeled as thin file or no file credit seekers.
It is no secret American colleges attract top global students, and, when they complete their education, many of those students choose to stay here. This includes healthy numbers of engineers, doctors and MBA’s, careers with good earning power. Silicon Valley and Wall Street are certainly aware of it, so it is about time financial services come around, Mr. Kapadia said.
“The college campus is America’s new Ellis Island. The Statue of Liberty’s motto is no longer, ‘Bring us your tired, your hungry, your sick.’ It’s, ‘Bring us tomorrow’s doctors, inventors, and CEOs.’”
The SelfScore MasterCard is simple in structure, much like your first credit card. No annual fee, security deposit or U.S. credit history are required. The limit is only $1,500.
But it does the trick. Let a new group of borrowers gain entry-level access into the financial system and see how they do. Those who fare well, and SelfScore believes there will be many, will progress through the financial system to higher limits, car loans and mortgages. Little is lost on those who stall.
Prior to founding SelfScore, Mr. Kapadia was a top analyst and fund manager on Wall Street, working in equity with a focus on Asia. He saw the disruptive potential of mobile and social media and was an early investor in LinkedIn and Facebook when both were still private.
In 2012 he met Mr. Hallinan. After beginning his career with the military and consulting with Booz Allen, Mr. Hallinan saw the power of mobile and social media to serve as a person’s digital identity and persona.
The pair saw similar potential for disruption in credit.
“The three bureaus had not changed in 40 years,” Mr. Kapadia explained. “They were designed before the internet, smart phones and social media. It’s an antiquated way of measuring credit.”
Mr. Kapadia said they immediately saw social data playing an important role. The first population they thought of were international students.
A timely case study was Mr. Kapadia’s cousin, who in 2012 came from India to study at UCLA. Highly educated in a field with good career prospects, she struggled to get credit. Banks directed her to completely inappropriate products.
“They were not good products so I added her to my credit card,” Mr. Kapadia said.
The problems from lack of credit quickly spread, Mr. Kapadia said.
“You have a diligent, smart student, with a master’s degree in computer science who’s in a good university,” Mr. Kapadia said. “Even though they have a $100,000 internship, they cannot get a lease or car because they have no credit history.”
Cities such as New York, Boston and San Francisco are benefiting from the intellectual and economic strength of students from countries like Hong Kong, Taiwan, China and India, Mr. Kapadia said. Those students spend $31 billion each year on tuition, living expenses and entertainment. Their predecessors are now running Google, Microsoft and other companies.
“American universities place international students on equal footing with their American counterparts by placing them in the same classes but banks consider them the bottom of the barrel (for providing credit),” Mr. Kapadia said.
Much like some student loan refinancers, SelfScore has identified future high earners considered high-risk by the banks but who, by common sense, should be reliable bets.
The SelfScore model seems compatible with social media and Mr. Kapadia agreed. While Facebook keeps much of their information private, LinkedIn’s format makes its data especially useful.
“LinkedIn offers richer information,” Mr. Kapadia said. “Education, skills, employment history and your network, it’s easy to infer whether you will keep a job or if you will get one.
“The biggest reason for credit default is job loss, so if I can determine someone’s employability I can determine if they will keep a job.”
Mr. Kapadia explained there are several key pillars in assessing credit risk. One is the ability to determine actual identity. What is the applicant’s physical address? How often do they move? Utility bills are a reliable way to prove location and assess transiency.
Another is the ability to pay. A bank statement addresses that.
Utility bills, bank statements and other documents are perfect inputs for SelfScore’s API. They are extremely reliable.
It didn’t take long to narrow down the potential partner list, Mr. Kapadia said. American Express and Discover are closed networks, so it came down to Visa or MasterCard.
“We chose MasterCard because of its brand reception overseas,” Mr. Kapadia said. Most of SelfScore’s potential client pool will be familiar with the brand.
Investors believe in SelfScore’s model, Mr. Kapadia said. They have raised more than $9.5 million in venture financing.
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