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Wednesday, May 18, 2022

Opinion > OakNorth

Blending technology with personal relationships

Ben Barbanel, head of debt finance at OakNorth | 16:57 Wednesday 18th October 2017

We launched in September 2015 with a very simple proposition: we raise deposits from both businesses and individuals and use that to help fund our lending (typically between £500,000 to £20m) to fast-growth businesses and established property developers .

On the deposits side of the business, the process is fully automated, enabling savers to open an account within minutes, and the entire function is run by just three team members. The fact that we're branchless enables us to keep costs low and pass on these savings to our depositors in the form of more competitive rates.

In May 2016, we became fully hosted in the cloud – we wanted to make this transition for several reasons:

  • It enables us to be more flexible and change settings as we go along. As a new bank, we wanted the freedom to experiment and continuously evolve our offering in line with customer needs and expectations.
  • It means we can make changes to our systems much more quickly than most banks — often in days rather than weeks.
  • The cloud can handle rapidly increasing workloads — it doesn't matter if we on-board 20 or 20,000 customers, the AWS cloud eliminates the need to try to approximate our infrastructure capacity needs.
  • It is now possible to be more secure in the cloud than on-premises. AWS invests a huge amount in security, meaning we can build more secure applications for our customers.
  • It enables us to focus on the business side and the functionality of what we want to achieve, as opposed to getting distracted by IT issues – we've managed to grow our loan book to over £750m in just two years, helping more than 150 businesses achieve their growth ambitions.
  • It dramatically reduces our expenditure, which is what helped us reach cash flow break-even in just 11 months.

On the lending side of the business, we also rely heavily on technology – by leveraging a combination of fundamental credit analysis, data analytics, AI and machine learning, we are able to underwrite loans against multiple asset types: real estate, stock, debtors, plant and machinery, and intellectual property and do this at scale. On average, it takes just three weeks – from first meeting to disbursement of cash – to complete a transaction. This is with the same level of rigorous and robust underwriting as can be found at private equity firms, and is evidenced by the fact that we've had over £150m of repayments since launch and never so much as a late payment, let alone a default.

However, while technology plays a central role in our business, we still think face-to-face interaction and personal relationships are extremely important if you want to deliver a great customer experience. Unlike incumbent banks, we give our borrowers the chance to come in and meet our credit committee and discuss their lending needs directly with the decision makers. We don't have reams of tick-box forms, and we don't have set credit committee days, so we can sit whenever our customers need us and are nimble enough to make things happen as quickly as necessary.

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