Reinventing financial services for SMEs: OakNorth Bank

SME Banking Community
Q+
18/01/2023 Interview
Rajesh Gupta OakNorth Chief Financial Officer

We often read that the offers of traditional banks are not adapted enough to SMEs. So, we set out to discover new players dedicated to SMEs. Rajesh Gupta, CFO of OakNorth Bank, gives us his point of view and shares with us what OakNorth Bank offers its customers.

In which countries do you operate and how do you perceive the banking offer to SMEs there? In your opinion, does the offer from existing financial institutions meet the needs of SMEs?

Launched in September 2015 and founded by entrepreneurs Rishi Khosla and Joel Perlman, OakNorth Bank is a fully-licensed UK bank. This is the only market OakNorth Bank currently offers savings and lending products in, though it has teams in India and the US.  

In terms of how we perceive the current offering for SMEs, we believe this segment of the market has been underserved for decades. One of the main reasons behind this is that innovation in commercial banking has been limited to loan origination systems and modern core banking systems, which means the way that scale-up/mid-sized businesses are served hasn’t evolved for decades and much more innovation is needed.

Compare this with what’s happened in the consumer and micro-SMB space, where the customer experience has dramatically improved over the last 10-15 years, and where there are now highly customized products at the point of sale and embedded within other journeys. The issue is that most lenders and financial institutions simply don’t have the data and analytical capabilities to bridge the techniques used in the consumer and SMB space with the analytical rigor of corporate lending – i.e. taking a granular, forward-looking view of each business. As a result, they default to the same approaches which have been used for decades, relying on broad sector assumptions and a heavily manual approach that provides an (a) inconsistent, (b) slow, and (c) poor experience for customers.

Furthermore, once these micro-SMEs become larger, the existing players capturing these customers can no longer serve their needs, as they will require more differentiated and complex solutions, which are foreign to traditional banks. As a result, many SMEs view themselves as overlooked and underserved when compared to consumers, micro-SMEs and corporates.”

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