- London fintech startup OakNorth has won two major new clients for its credit intelligence suite.
- Capital One and Fifth Third Bank have signed up to use OakNorth's default prediction software.
- The move is part of an expansion of the company's US operations following a recent deal with PNC.
- See more stories on Insider's business page .
London fintech startup OakNorth has agreed deals with two of America's biggest banks as the company's push into the US intensifies.
Capital One and Fifth Third Bank will use OakNorth's "credit intelligence" software, which analyses a bank's loan book to determine which facilities could be at risk fo default, Insider can reveal. The two banks rank 12th and 17th in the US by assets held and join PNC (10th by assets in the US) as customers of OakNorth.
OakNorth is largely split into two different arms. In the UK, it acts as a challenger bank that issues loans ranging from £500,000 ($698,000) to £45 million ($63 million) to SMEs.
Internationally it licenses its software to other lending houses around the world.
The company's own research, previously seen by Insider , indicates that the SME loan market in the US is about $1.6 trillion with OakNorth continuing to push for more business stateside.
"This is a gamechanger for us, going from one bank to three shows our approach has legs and is great validation for the business," OakNorth co-founder Rishi Khosla told Insider in an interview.
"These banks have incredible resources and usually believe that they can do everything themselves with those resources so the fact they are choosing to use someone else for something as important as credit intelligence shows there is something very strong here."
The software gives lenders a "granular approach" to the credit process, Khosla said. Rather than the conventional "top-down view" of a dozen macro sectors, OakNorth has built a new "framework to look at new loans."
Khosla previously told Insider the company had set up scenario analysis on 204 different subsectors of the economy. He said bank models were "not set up for risk weighting" and that the lockdowns that had taken hold during the pandemic had meant different analysis was required.
When conventional banks assign loans, they often use a small set of macro sectors to determine the risk and cost of the debt.
But OakNorth's software offers a more extensive and malleable process to more effectively determine the risk profile of a company. The promise is that banks can more safely allocate cash from their loan book and more efficiently set the price for companies.
Continued expansion
In 2018, OakNorth raised $390 million from SoftBank's Vision Fund as part of a wider $440 million round — one of the biggest funding rounds at the time for a UK startup.
Last November, Japanese banking giant Sumitomo Mitsui Bank (SMBC), acquired a $30 million stake in the business .
OakNorth's deal with SMBC came in the wake of a sale of a stake in the company by early backer IndiaBulls . Although the stake was sold at a discount, it had no material impact on the company's valuation, according to Khosla.
OakNorth has been hiring extensively in the US, having brought in tech veterans Jessica Reiter as CMO and Anya Darrow as VP of customer success.
Other C-suite hires include Peter Grant, formerly head of Saleforce's UK operations, Raj Cherabuddi as VP of Engineering, and Jeremiah Norton and Bruce Richards as Advisory Board members.
The company has also recently made another hire to the US executive team with former Fidelity Investments staffer Peter Brown as Senior VP of Product.
Other European fintech firms are also attempting to expand across the Atlantic with challenger banks like Monzo and Revolut applying for US banking licenses.
The UK banking side of the company remains "an incredibly important pillar for the business," Khosla added.
The firm, founded in 2015 and valued at $2.8 billion, is also profitable, making it a rarity both in the SoftBank Vision Fund portfolio and on the wider fintech unicorn scene.
When asked if OakNorth might follow fellow SoftBank portfolio company Grab into the world of SPACs, Khosla said: "We have been approached by many, many SPACs but we're very focused on building the business."
Via PakApNews