How to identify profitable cross-border opportunities that other banks miss
A guide for banks on understanding the size of their foreign customer base
A major European bank we worked with recently analyzed their loan portfolio and found that foreign customers represented just 0.45% of applications. The conclusion seemed clear: foreign residents simply weren't interested in borrowing. Yet when the same bank examined their current account holders, they discovered that around 15% were foreign residents.
This measurement paradox reveals a fundamental problem across European banking. Financial institutions are systematically underestimating a premium customer segment because their data collection methods create blind spots rather than accurate market pictures.
The measurement problem
Traditional loan applications filter out foreign customers before they appear in bank data. Forms requiring local citizenship or long residency periods create immediate barriers. Foreign residents often abandon applications or avoid applying entirely.
This creates invisible demand. Banks see few foreign applications and assume no interest exists. Yet current account data shows 10-25% foreign residents, depending on the market.
Banks also systematically reject domestic citizens with cross-border backgrounds without realizing it. These customers appear as local citizens but get rejected for insufficient credit history or income verification challenges.
Examples include:
- Returning expats with foreign credit histories (e.g. German engineer returning from working in Spain)
- Cross-border commuters (e.g. living in France, working in Switzerland)
- Remote workers paid by foreign companies (e.g. Estonian developer paid by US tech company)
Banks lack systematic ways to analyze why these rejections happen, and this incomplete data leads to false conclusions. Manual investigation and including cross-border data would show that many “thin-file” rejections are actually profitable customers whose financial profiles don’t fit standard local assessment methods.
Strategic discovery methodology
Forward-thinking banks are developing comprehensive approaches to reveal this hidden segment using multiple data sources and analytical methods.
Customer base analysis starts by comparing citizenship demographics of current account holders with loan applicants. This reveals the basic foreign vs. domestic opportunity gap. To identify domestic citizens with foreign credit histories or income sources, sample rejected thin-file applications and examine account opening addresses, employment history, and income sources for foreign elements. Banks typically discover that 10-15% of their customer base has some form of cross-border financial background.
Macro data analysis uses national statistics and Eurostat migration figures to size the local opportunity. Understanding how many foreign residents live in your market provides context for internal findings. Cross-border employment data reveals another segment: local residents working for foreign companies or in neighboring countries. If census data shows 200,000 foreign residents in your region plus significant cross-border employment, but your bank sees minimal foreign-related loan applications, the combined gap becomes quantifiable.
Internal data mining uses existing bank information that may not connect to lending decisions. Regulatory reports often contain nationality data, while transaction patterns indicate customer stability and income sources. Cross-border customer identification requires manual sampling of thin-file domestic customers and high-risk flags, looking for foreign employment, international transactions, or income verification challenges. Historical rejections reveal how many were based on data gaps rather than actual creditworthiness.
Application journey tracking examines where potential customers drop off during the application process. Many banks discover significant abandonment rates when citizenship or residency requirements appear early in digital applications. Exit surveys and customer outreach can provide insights into why foreign residents don't complete applications.
Systematic rejection tracking creates new measurement protocols to capture the invisible demand. Rather than only counting completed applications, banks begin monitoring partial applications, customer inquiries that don't progress to applications, and rejections specifically due to insufficient credit data. Based on Mifundo's experience, even a two-month tracking period often reveals that foreign customers represent 10-15% of potential lending volume across various markets.
Pilot programs test what happens when barriers are reduced. Some institutions create streamlined application processes for existing foreign customers or invest in cross-border credit data access through platforms like Mifundo. These pilots can reveal dramatic increases in both application volumes and approval rates when proper risk assessment becomes possible.
Team preparation ensures staff can effectively serve this customer segment. Training programs help relationship managers understand cross-border credit assessment and integrate new data sources into lending decisions while maintaining regulatory compliance. This operational readiness proves crucial when application volumes increase following barrier removal.
The barrier effect
This phenomenon has historical precedent. Before the Schengen Agreement, travel data suggested limited demand for cross-border movement within Europe. Once barriers were removed, travel volumes exploded, revealing that the previous data reflected restrictions rather than actual demand.
European banking faces a similar situation. The European Banking Authority's 2019 report found that only 7% of consumers used financial services from another EU Member State, highlighting systemic barriers to cross-border financial services. Current application data reflects the friction of cross-border credit assessment rather than genuine market appetite.
What banks discover
Banks that implement cross-border credit capabilities discover that foreign customers often represent 10-15% of potential lending volume. More importantly, this customer segment frequently demonstrates strong credit performance, sometimes outperforming domestic borrowers in terms of default rates.
The customer profile that emerges challenges assumptions about foreign residents as higher-risk borrowers. Many appear to be established professionals who relocated for career advancement, bringing substantial incomes and conservative financial habits.
They often seek larger loan amounts for mortgages or business investments, contributing meaningfully to portfolio growth. This means early adopters gain significant competitive advantages while most banks continue rejecting foreign applicants due to thin domestic credit files.
Strategic implications
Most European banks continue operating with measurement systems that systematically undercount cross-border opportunity. The institutions that recognize and address this blind spot first will establish market leadership positions while competitors remain unaware of what they're missing.
The opportunity isn't small - it's simply invisible to traditional measurement methods. Banks that invest in revealing this hidden segment will discover that the cross-border market is both larger and more profitable than their current metrics suggest.
