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OakNorth: A blueprint for profitable growth in digital banking

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OakNorth has emerged as a standout in the fintech realm thanks to its exceptional business model that not only ensures profitability, scalability, and growth but also sets it apart from other challenger banks in the UK and neobanks worldwide. 

While many challengers and neobanks struggle to turn a profit, OakNorth has cracked the profitability code early on by combining its lending operations to mid-corporates in the UK with the licencing of its cutting-edge technology to banks across the US, Europe, and Asia. This dual approach generates revenue from lending and unlocks substantial income from technology licensing, propelling OakNorth forward as a profitable, scalable, and growth-centric force in the financial landscape.

Over the course of 10 years, OakNorth has undergone a remarkable transformation from a humble startup to a powerhouse in the challenger banking landscape. From its early days as a fledgling startup, OakNorth has experienced rapid growth, driven by its innovative approach to lending and its relentless focus on serving the underserved SME segment. Below is a rundown of the key events in OakNorth’s evolution

OakNorth’s Challenger Bank Playbook

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Unpacking OakNorth's Playbook: Five power moves

Let’s dive into the secrets behind OakNorth’s remarkable growth and the recipe for its profitability and scale. OakNorth has made a name for itself and caught the attention of venture capital firms, banks, and private equity funds with its playbook. Here are the five building blocks that have fueled OakNorth’s success:

  1. Hitting the Bullseye: OakNorth targeted an underserved niche in the market, known as the missing middle. This segment, sandwiched between micro-businesses and large corporations, was longing for financial attention. By catering to their unique needs with precision and efficiency, OakNorth captured their hearts and wallets.

2. Money Talks, Technology Rocks: OakNorth unleashed a clever move by licensing its cutting-edge technology, OakNorth Credit Intelligence(ONCI), to banks outside the UK. Instead of chasing licences globally, they opened doors for lenders to get a taste of their advanced tech. This not only earned them fast cash but also built a global reputation. Several tier-1 banks in the US, such as Customers Bank, Old National Bank, and PNC, and a few others in Europe, such as NIBC Bank and real-estate lender OIMIO have embraced ONCI to enhance their credit assessment and portfolio monitoring capabilities. 

3. Allies in Arms: Partnerships lie at the core of OakNorth’s business model. They have formed collaborations with fintechs such as Monzo, Raisin, Moneybox, Flagstone, Insignis, Aviva, etc., to expand their deposit base through retail investors. On the lending side, it partners with Accountants and Brokers such as Cottons Group, Crowe, and BHP, among others, to cost-effectively acquire SMB Customers. OakNorth also has co-lending partnerships with The Mezz Lender, Blend, etc., to jointly deploy capital to SMB customers.  

4. Banking on Believers: OakNorth impressed the banks that relied on their credit intelligence platform so much that some of their clients, such as SMBC Bank and NIBC Bank, have chosen to invest in the company, showcasing the belief in the technology and the business model that OakNorth has established. 

5. Sustainability Squad: OakNorth not only chased profits but also took a stand for sustainability. They developed the ON Climate product, empowering lenders to assess climate transition risk in their loan portfolios. By leading the charge against climate change, OakNorth proved they’re not just about money, and they care about making a positive impact too.

With these five power moves, OakNorth’s playbook has propelled them to new heights of profitability, scalability, and growth. By targeting the missing middle, leveraging technology licensing, and forming strategic partnerships OakNorth has carved a unique path for itself in the financial world. As it sets its sights on truly becoming a global player and evaluates its options to go public, OakNorth’s future holds immense promise and potential.

Authors

Founder & CEO | sanjeev@whitesight.net

Sanjeev is a fintech aficionado who loves to explore the depths of the industry as much as he loves to explore the depths of the ocean in his scuba gear. He is the founder and CEO at WhiteSight, bringing a wealth of research and advisory experience to the fintech world.

Fintech Analyst

Samridhi is a fintech analyst within the WhiteSight team, researching fintech trends and providing insights into everything from new markets and investment opportunities. Just like she connects the dots to reveal the big picture of the ever-evolving fintech landscape, she has a keen eye for discovering the brushstrokes of Madhubani paintings and the contours of the hills.

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