10 Mar Foreign Students Add $31 Billion To Us Economy — Now They Can Get A Student MasterCard
New York Times columnist Thomas Friedman has frequently advocated stapling a Green Card to every advanced degree awarded to a foreign student.
Kalpesh Kapadia, CEO of SelfScore, has a more modest proposal — provide international students who have come to the United States with an unsecured credit card from MasterCard, the most widely recognized card brand around the world.
“The credit need for this population is greatest when they arrive,” said Kapadia. “They can’t get a luggage cart at the airport without a credit card.” When they try to get a smartphone account, they need a credit card. Landlords are apt to charge them double the usual security deposit when they rent because they don’t have credit history, or in the words of the business they are thin file or no file.
“The current traditional system based on FICO scores and credit bureaus completely ignores them until they get a job and start showing up in traditional databases,” he added.
Kapadia, who came of the United States from India 20 years ago to study at the New Jersey Institute of Technology before going on to Carnegie Mellon, said those benighted times lacked smartphones, social networks and databases recording visas and university enrollments. The company uses Jumio and Blockscore to verify identity, he said, and it also checks a national database of passports and enrollments.
International students have made it through many filters before they get to the United States, he explained. They have been through interviews at American consulates, they have been accepted at some of the country’s most selective universities, and they have had to prove they can support themselves once they get here.
SelfScore looks at the students as opportunities rather than as risks, a contrast with banks, he added.
“SelfScore determines international students’ creditworthiness using alternative data like ability to repay and predictive attributes such as education, major, cost of education, source of initial funding, and future employability,” the company says on its Web site.
It has launched the first dedicated MasterCard credit card designed for international students in the U.S. It has no annual fee, no security deposit and no U.S. credit history is required. The credit limit for new users is $1,500. SelfScore chose MasterCard because it is more widely recognized overseas, Kapadia explained.
“We want to make their life easier and make their transition to the U.S. financial system easier. They are mis-classified for lack of data. We want to level the playing field for them,” he added. “The universities don’t discriminate against them; if you have a good test score and good grades you are treated at par by the universities, but banks treat them as the bottom of the barrel.”
A friend from India came to get a masters in computer science at UCLA and had to use a debit card everywhere. She got an internship with IBM paying $100,000 a year but no one would lease her a car for $200 a month because she didn’t have a credit card.
The U.S. has one million students from abroad, Kapadia said, and they are making a substantial contributions to the American economy — $18 billion in tuition and $13 billion in living expenses each year. They help state universities stay afloat by paying the full out-of-state tuition. California has an especially large funding gap between in-state and out-of-state tuition, he added.
“Universities are filling the gap by bringing in fully paid foreign students. In graduate programs 40 to 60 percent of the students are from other countries. That population is growing by six to eight percent a year while the underlying American population in universities is stagnant at 20 million. The universities are the new Ellis Island, attracting the best and the brightest from around the world and we want to help the assimilate into U.S. society.”
Banks are missing the chance to catch customers early and earn life-time value from students, added Kapadia, who got an American Express card when he was a student.
“I must have paid $20,000 in total fees to them over that time, and they gave me a T shirt in 1995 to get me as a customer.” He has been incredibly loyal ever since, he added.
And some of these immigrants have done quite well. The two largest tech companies are run by Indians who came to the U.S. as students, he said — Google CEO Sundar Pichai and Microsoft CEO Satya Nadella, not to mention the CEO of MasterCard, Ajaypal “Ajay” Singh Banga and Pepsi’s CEO Indra Nooyi.
The issue of international students has become part of the political debate, he added.
“People all the way to the right are acknowledging we need to keep the students here. We educate them at Harvard, Stanford, Wharton and then send them back home. Even Donald Trump said recently that we ought to keep them here.”
Some of the students come from very rich families, but many are from families that make immense sacrifices to send their children to study in American universities where they tend to major in STEM or business degrees, he said. Their financial challenge has become greater because the U.S. dollar has appreciated against other currencies, he added.