Banks Behind the Idea Editor's Choice Fintech

Behind the Idea: OakNorth

When COVID-19 first began to emerge in January 2020, the first step that OakNorth took was to look at the potential for international supply chain disruption. The European fintech unicorn developed its own “COVID Vulnerability Rating” (CVR) Framework, which integrates over 130 proprietary subsector-specific COVID-19 stress scenarios with regional overlays, incorporating assumptions for impacts on key financial metrics such as revenue, operating costs, working capital and CapEx.

The Framework enables commercial lenders to re-underwrite loans and brings consistency to their credit approach through the crisis, running risk analysis on a consistent basis, and since the start of the year, has analysed around $400bn of loans.

Rishi Khosla OBE is the Co-founder of OakNorth

Rishi Khosla OBE, is the Co-founder of OakNorth. Prior to this, he co-founded Copal Amba, a financial research firm that was scaled to 3,000 employees and sold to Moody’s Corporation in 2014. He is also an early-stage investor in Paypal and Indiabulls. Known for building the fastest-growing business in Europe and one of the world’s only profitable fintech “unicorns”.

What has been the traditional OakNorth response to financial technology innovations?

OakNorth combines a deep understanding of credit, rich data sets (which include unconventional and previously unavailable data), cloud computing, and state of the art machine learning, to provide its bank partners with the insight and foresight they need to holistically and profitably lend to the Missing. The operating efficiencies realised through the OakNorth Platform allow banks’ relationship managers to focus more time with borrowers, having received insight on those borrowers and their sector.

Through 360-degree monitoring of borrowers’ financial and operational data, the Platform provides banks with early warning indicators in case of deterioration in credit quality, enabling it to have preliminary conversations with borrowers before negative credit issues arise – something that will prove invaluable during the economic recovery that will follow after the COVID-19 crisis abates. 

How has this changed over the past few years?

It hasn’t – our approach was always to build a Platform and prove it within our own bank before we begin licensing it to other lenders. That’s what we’ve done – we’ve built OakNorth Bank in the UK which today ranks within the top 1% of banks globally in terms of performance, and that gives us a great proof of concept for the Platform.

Is there anything that has created a culture of change inside the company?

We’re a very mission-driven and values-driven company. Like any fast-growing company, it’s an environment that is very intense and high-pressured, but it’s also fun, rewarding, collaborative and open.

We’re fortunate to continue to attract some of the most ambitious and talented people from across industries who also share our values. Those values are working together as One Team to deliver products and services to our customers that are ‘10X’ better than the competition and deliver ‘Customer Delight’, ensuring that we put energy and momentum into everything we do.

We’re not afraid to ‘Say it how it is’ or zero-base the way things have always been done. Joel and I have said numerous times that we want to continue building this business for the next few decades. We are not looking for a quick exit. This reflects our final value of ‘Right Ambition’, and one that is shared by our team. Almost half of our employees have taken the opportunity to become shareholders in the business, investing their own money and in doing so, helping to build for the long term.

What FinTech ideas have been implemented?
One of the largest banks in the US, PNC, is deploying OakNorth’s CVR Framework across its C&I and CRE portfolio, mapping individual borrowers to 130 domains. PNC and OakNorth will run portfolio diagnostics on a periodic basis to factor the rapidly evolving scenarios of COVID-19 across subsectors and regions.

What benefits have these brought?
The OakNorth Platform enables the lenders we work with to have fundamentally different conversations and engage with their borrowers in a dramatically different way. It brings credit insight about borrowers’ businesses back to the front line, democratising this knowledge so that lenders have a deeper understanding of the individual business, its industry and its sub-sector. As a result, they have more relevant and thoughtful conversations with the business owner and can build much more meaningful relationships with them.

However, the Platform doesn’t only assist them with credit analysis and data optimisation, it also aids in portfolio monitoring. By proactively monitoring clients’ financial and operational data, it is able to provide early warning indicators in case of deterioration in credit quality, enabling the lenders we partner with to have preliminary conversations with their borrowers, well before a negative credit issue arises – thus leading to more positive credit outcomes.

Do you see any other industry challenges on the horizon?

Businesses need liquidity to overcome the challenges being presented by COVID-19 and get back on their feet when the recovery begins. They are looking to banks and lenders to support them in this crucial period – either directly, or through Government loan programs.

However, given the unprecedented scale and dynamics of this crisis, trying to assess credit risk based on previous risk ratings doesn’t make sense as all previous correlations are broken. As a result, lenders need to be able to:

  • Reassess credit risk based on forward-looking scenarios which factor in the impact that COVID-19 is having on businesses and then follow through on these stress scenarios on a granular, loan-by-loan basis, rather than just at the portfolio level;
  • Monitor all credits more closely as sectors have become more volatile post-COVID-19, and;
  • Re-underwrite these loans at depth and bring consistency to their credit approach through the crisis, running risk analysis on a consistent basis.

Can these challenges be aided by FinTech?
Absolutely. We’re helping lenders address this challenge via our “COVID Vulnerability Rating” (CVR) Framework, which helps them undertake portfolio diagnostics to rate loans from 1-5 based on their vulnerability to the new economic environment, with 1 being least vulnerable, and 5 being most vulnerable. The ratings are based on multiple factors including liquidity, debt capacity, funding gap and profitability, and can be dynamically customized to reflect the lender’s credit risk criteria and appetite.

Final thoughts?

Credit insights will play a huge part in the COVID-19 recovery. Instead of wasting time on the things that don’t matter, it allows banks to be able to spend more time on the things that do – such as structuring a loan for the borrower’s needs in the time frame they need it, as well as exploring cross-selling opportunities


  • Gina is a fintech journalist (BA, MA) who works across broadcast and print. She has written for most national newspapers and started her career in BBC local radio.

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