On a fintech mission to help small and medium enterprises

On a fintech mission to help small and medium enterprises

Rishi Khosla is the Co-Founder and CEO of Britain's digital bank OakNorth, which specialises in small and medium enterprise (SME) lending globally, using its data and technology platform OakNorth Analytical Intelligence. The company recently completed a $100-million funding round and has doubled its loan book from $1.1 billion to $2.2 billion since the start of 2018. In this interview, the Global Indian gives an insight into this fintech success story.

What are the key factors behind OakNorth's recent hugely successful funding round

I think it's several factors:
  • We're helping to solve a global problem, enabling small and medium-sized businesses to obtain the debt finance they need to grow.
  • We've already proven the proposition and the effectiveness of the platform via our own balance sheet lending in the UK. In the UK, OakNorth has lent over £2 billion to businesses profitably (the business made £10.6 million pre-tax profit in 2017) and without a single default to date. Its loans have directly helped with the creation of over 8,500 new homes and over 8,000 new jobs, as well as adding several billion to the economy.
  • We have seen a huge amount of interest from banks around the world. We only began licensing the OakNorth Analytical Intelligence platform a year ago and already have numerous banks using it and $5 billion of assets under service. In fact, NIBC (a Dutch bank) which is using the platform also participated in the most recent funding round - a clear testament to the value proposition they see in the platform not only for them but also for lenders around the world.
  • There's a lot of noise around fintech but amongst all of this, we are one of the few proven models. Other obvious successes are the likes of Adyen, which produces real margins and growth just like we do.

Is India among the countries OakNorth is looking to expand into; what are your wider global expansion plans

The OakNorth Holdings group is supported by over 150 team members across several different markets - Istanbul, NYC, Singapore, Bangalore, and Gurgaon - so we already have a significant presence in India. The team there is predominantly made up of credit analysis experts who leverage big data and AI [artificial intelligence] via the OakNorth Analytical Intelligence platform, to help us deliver customised lending solutions to small and medium sized businesses around the world. We continue to build our team and are looking to hire another 80 people for our
teams before the end of the year. Throughout the rest of the world, we will continue building teams in key markets where there is a strong interest in the platform and its ability to help banks better serve their SME customers.

How do you ensure SMEs remain central to the offering of your fintech platform Please give some details about the OakNorth Analytical Intelligence platform.

Our mission is to enable entrepreneurs worldwide to access customised mid-sized loans, so these businesses will always be the focus of the platform. The platform uses technology to apply the rigorous credit analysis methodology used for large corporate loans in a much more efficient and less manual way and applies the private equity approach to monitoring to commercial lending. The platform collects millions of data items on SMEs across various parameters, sectors, and markets, and uses machine learning algorithms to identify data that lenders need to make more informed credit decisions through detailed line item underwriting. OakNorth Analytical Intelligence′s team of credit analysts and data scientists manage the process, training the machine learning algorithms, so that the platform continues to evolve and get smarter. The platform therefore provides its banking clients with significant process efficiency gains, data-driven decision making, and smarter credit analysis and capabilities.

Is Brexit a concern for firms like yours

The biggest concern we have from Brexit is around talent. It is essential that immigration policy doesn't slow down the influx of excellent global talent into the UK, as without this it will be increasingly difficult for the nation to compete with surging entrepreneurial and fintech hubs. Currently, the UK benefits from a diverse mix of talent, world-renowned higher education institutions, forward-thinking regulators, and a sophisticated and active investor network - all of which help to develop a unique ecosystem where companies like OakNorth can be born and thrive.

How do you see the India-UK partnership developing in the fintech sector

We've already seen significant steps taken this year to further strengthen the UK and India's
relationship. For example, in April, Prime Ministers Modi and May launched the UK-India Tech Partnership which aims to identify and pair British and Indian tech businesses with one another, as well as venture capital firms, universities and others. This year has also seen the launch of the UK-India Tech Alliance, which gives the trade associations from both countries (techUK and NASSCOM) the chance to work more closely together. In terms of fintech specifically, India is on the cusp of a financial revolution - total financial transactions on retail digital payment platforms are projected to increase by 400 per cent to Rs 1 trillion by 2023 and we've seen phenomenal growth from Indian fintech firms such as
. However, 40 per cent of India's population remains unbanked, and more than 80 per cent of payments are still made in cash. This represents a huge opportunity for fintech in the country and increased collaboration between the two markets in the future.

Finally, how would you describe your connection with the country of your origin

Being British Indian, I have a very strong connection with India - I visit the country multiple times in the year for both business and pleasure. OakNorth has two offices there, and Indiabulls (India's largest non-bank SME lender) is one of our investors.

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