Exploring Fintech with OakNorth

• 6 September 2019 | 1487 Views | By Abhinav Mishra

With the fintech sector leading the startup race and introduction of a slew of digital-only banks (meaning a bank with no physical branches), there is one bank which has stood out in terms of its innovation, performance, and credibility. Lets deep dive into that Bank and see how it sets itself apart from all of its traditional as well as modern competitors.

Which Bank is it?

OakNorth Bank was found in the United Kingdom, and is involved majorly in catering to small and medium-sized companies that need loans. The bank, which gained regulatory approval in early 2015, was founded by entrepreneurs Rishi Khosla and Joel Perlman like it is said “Necessity is the mother of Invention”, Oaknorth was founded on the same principle here, where the founders themselves saw the need of business and their problems in getting loans.

One of Europe’s fastest-growing and most valuable FinTech companies, it works to match entrepreneurs and founders with customized-tailor made solutions that suit their needs and is a win-win situation for both parties.

Why do we need OakNorth?

The answer to this question lies in the entrepreneur’s story. Rishi Khosla and Joel Perlman faced went through many struggles while trying to secure working capital to support their rapidly growing business (named as Copal Amba), as none of the banks was willing to lend to them because these businesses didn’t have any property to keep as security. As their business kept growing, they realized that there are millions of other businesses around the world facing the same struggle in securing growth finance.

After scaling Copal Amba (their own business) to almost 3,000 people and selling it to Moody’s Corporation in 2014, the two set out to launch a business focused on unlocking the untapped potential in complex mid-to-large ticket lending to businesses. The idea for OakNorth took birth here.

But why should we switch to OakNorth?

This is the best question which perhaps has the aptest answer. Every business needs to grow and to grow they need capital for which they need finance. Essentially, finance is the life-blood of every business. Whether it is to scale-up or grow businesses, or even established ones, should consider this because Oaknorth differs from other lenders in three key ways: 

• Transparency – allowing every prospective borrower the opportunity to meet Credit Committee (i.e. the decision-makers) and discuss their lending needs with them directly
• Flexibility – looking beyond real estate assets (e.g. stock, debtors, plant and machinery, intellectual property and alternative assets such as art) to deepen the collateral pool
• Speed – as the entire process is designed to transact loans as quickly and efficiently as possible (average time is weeks as compared to months with traditional lenders) so that the entrepreneur clients can get back to running their business. 

In May 2016, OakNorth became the first bank in the UK to have its core system fully hosted on the cloud after working extensively with Amazon Web Services(AWS) to drive the development forward with the regulator. Being cloud-based has its own distinctive advantages, guaranteed uptime, encrypted security, reduced management costs and instant scalability OakNorth has offices in London, Manchester, Gurugram, and Hyderabad. Yes, they have set up in India after Indiabulls took a controlling stake in the company.

But wait there’s more, it’s not just for loans!

OakNorth had secured a full banking license from Prudential Regulation Authority(PRA) and the Financial Conduct Authority (FCA) in March 2015 and it even began deposit-taking and lending six months later. Ever since Oaknorth got regulatory approvals to operate as a full-fledged bank in 2015, they took out attractive schemes for depositors as well. Savers should consider this because they offer the same level of protection as traditional high-street banks, but with typically much more competitive rates and not to mention being digital-only it means much less paperwork and much faster processes. Opening an account in Oaknorth is also very simple – accounts can be opened online via their website, and their mobile application typically takes only a few minutes to complete.

How OakNorth does it Differently 

While traditional lenders look for properties or something which has liquidity as collateral. Oaknorth, instead of defaulting to the property as collateral and a computer says no approach like all other banks, they focus more on proper understanding and underwriting the businesses that they are lending to. The lending directors take the time to understand the business and will consider multiple collateral types such as stock, debtors, plant and machinery, intellectual property, etc. They also aim to complete deals (from first meeting to disbursement of cash) in weeks rather than months, because funding delays have a material impact on growth and business’s opportunities. One unique thing, Okanorth invites borrowers to present their company directly to credit committee allowing for greater transparency and feedback directly from the decision-makers. This entrepreneurial approach is completely different from what businesses experience with larger banks where they’re one of the hundreds of clients that their relationship manager deals with. This eliminates the need of having a sales team that pitches to the credit committee and also creates a deeper bond with the client. From, the client-side, they directly receive the feedback from the decision-makers themselves,

What sets OakNorth apart from the rest of the banks?

OakNorth is Europe’s most valuable fintech with a $2.8 Billion valuation. It has lent $4 Billion to British businesses without a single credit default. It has the record for being the first of its kind for any financial services company.

According to Crunchbase, Oasknorth is one of the top five best-funded fintechs globally, thanks to more than 1 billion dollar funding it has received to date from its traditional counterparts like Indiabulls, Coltrane, Edbi and even Softbank, making a unicorn startup!

Besides the successful banking business, Oaknorth has diversified the leverage the worlds most precious commodity it has, Data It has successfully launched its data and technology platform, OakNorth Analytical Intelligence, with partners in eight new global markets providing advanced analytics including credit analysis with proactive monitoring and machine learning statistics to its clients.

Oaknorth is only the third new retail bank to be licensed in the UK in 150 years. And the first new bank to being profit just inside a year, reporting a £10.6 million pre-tax profit in 2017.

What lies ahead for OakNorth?

The company is aggressively expanding and hiring new staff in their Manchester Headquarters, with a new expanded office location, the company has already secured a £40.2 million loan to Select Property Group and a £20.7 million loan to Fortis.

Even though Brexit has brought no big businesses to this company but having strong cash flow and profitability makes it withstand the Brexit storm. The company is hoping to expand into the US by the end of this year and they are not planning to stop there!