For all the immigrants making their way to the US every year to chase the American Dream, a few realities may a throw a wrench in their ‘pursuit of happyness’. A big one being access to credit as a good credit score or history is critical for banks to lend you money.
Seeing how immigrants struggle to access finance when they come to America, Naveen Qureshi, Towers Wilen, and Andrej Paule started Sable. Founded in December 2018, the startup has created a platform for immigrants to get credit.
"We are solving the problem of access to credit for people who are new to America. The US banks and fintechs alike operate on legacy credit risk models that look at US credit history to extend credit to a customer. Credit history takes years to build, and immigrants do not have it. As such, these immigrants are denied access to credit. Additionally, new immigrants also face issues when opening bank accounts," says Co-founder and Co-CEO Naveen Qureshi.
Other documents like Social Security Number too are not available as soon as immigrants move to the US. Naveen explains that in the case of students, the ID may not be available for four or more years.
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Sable has created a proprietary credit risk model – the first of its kind – to determine a customer’s credit risk rating without the need for US credit history, while at the same time keeping credit default rates below US industry standards. Additionally, Sable uses additional documents in lieu of SSN for identity verification.
Sable’s founders met at Columbia Business School in New York City in 2017. Naveen moved from Toronto to NYC for business school and experienced the challenges of the US financial system as an immigrant first-hand. Her Canadian credit history or financial products didn’t help her south of the border.
She met Andrej who had gone through the same challenges when he moved from Europe for grad school. They brought in Towers (the only American on the team) to figure out a solution. The three founders have corporate experience and Naveen has worked in Capital One before starting up.
Together, the trio spent weeks speaking to 300 immigrants to identify the problems they face, determine the addressable market, understand regulations, and assess revenue streams. Sable then started partnering with banks and alternative data service providers to create an underwriting model.
According to the US Census, there are close to three million Indians in the US. More than one million immigrants entered America in 2016 alone and the number has been consistent since that year, according to Pee Research. And they would all be needing to build their credit score for various needs.
The founders say Sable has opened doors for immigrants to allow them to start at an equal footing with their US peers.
“Our vision is to become a global bank to help immigrants moving from any one country to another with their financial needs,” Naveen adds.
The challenger bank model
Sable functions as a challenger bank—also called startup bank, which competes with larger traditional banks in the retail banking space—with a full suite of banking and credit products catered towards immigrants, which acts as a differentiator for the young startup.
The Sable app is available on iOS for quick identity verification and on boarding. Naveen explains that within five minutes, the user has a virtual debit card and credit card that they can use immediately, while waiting for the physical cards to arrive in mail.
As immigrants do not have US credit history, in addition to US credit bureau data, Sable uses alternative proprietary data to determine the credit risk of each applicant and gives access to customers appropriately.
An immigrant can sign up for a US bank account and credit card without the need of a Social Security Number and before they even move to the US, Naveen says, adding that the startup offers an unsecured credit card with high credit limits,zero-fees checking account, and benefits geared specifically towards internationals, such as free international money transfers.
Sable went through Y Combinator during the summer of 2019. "We launched our pilot in mid-August, a few days prior to Y Combinator’s demo day. We sent two Slack messages – one to the international student group at Columbia and one to the international student group at Stanford marketing Sable products and their benefits. Through these two Slack messages, and through some internationals in our YC cohort, within 10 days we filled our pilot of 300 customers,” Naveen says.
The bootstrapped startup went on to raise seed investment of over $120,000 from Y Combinator.
On their model, Naveen quips, "Our current offerings are a debit card (attached to a checking account) and a credit card, so our business model/revenue streams at this stage are all credit economics and banking. We earn revenue through three streams: interchange – that is, we earn a percentage of every transaction a customer makes. Interest, and with the launch of a rewards card, we will also earn a monthly fee on the rewards credit card."
The technology is built to scale with a small team of engineers. Sable hosts everything on Google Cloud.
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By the end of 2018, the U.S. banking system had $17.9 trillion in assets and a net income of $236.8 billion. The sector supports the world's largest economy with the greatest diversity in banking institutions and concentration of private credit anywhere in the world. The opportunity in the US economy are gigantic when it comes to serving consumers.
Based on customer feedback and needs, the startup is planning to launch more products and features in the next 18 months.
"We’re running an unsecured credit pilot as we speak. With unsecured credit, customers will not need to submit a secured deposit and will get higher limits than they would on starter cards or secured cards. This will be game-changing for our customer base, and we’ve already received lots of positive feedback," says Naveen.
Sable will also be launching an Android app this month.
The startup does not want to disclose any financial information at the moment but says it competes with CreditStack, and Petal. The partner with Nova Credit who are also in the similar line of business.
(Edited by Evelyn Ratnakumar)
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