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FinTech Female Fridays: Catherine Martin, U.S. Head of Legal, OakNorth

What drew you to pivot from covering the credit markets business at Citi to OakNorth, a credit platform for mid-market global businesses?

There is excitement all over the financial markets about the transformative effect of fintech. The credit markets and lending are my passion and I saw OakNorth as a unique opportunity to improve the lending space in a targeted way through technology by focusing on the lower middle market. I was also excited to join the business at this stage in its journey, as a scale-up with less than 1000 employees globally where I can interact with the founders and executive leadership team on a daily basis.

While OakNorth is very different to a large financial institution like Citi, the diverse skillset I acquired there has served me well in my role as Head of Legal in the United States for OakNorth.

How is OakNorth redefining the credit space?

The OakNorth Platform allows traditional financial institutions to significantly enhance and accelerate their credit decisioning and monitoring capabilities. The Platform leverages machine learning, decades of credit expertise and massive data sets to model a forward-looking view of a borrower’s financial situation, that’s informed by industry benchmarks, macroeconomic drivers, and scenario analysis specific to that business. The Platform provides commercial banking style credit memos, and proactive monitoring of loans.

What this means for OakNorth’s commercial banking clients:

· A better borrower experience leading to accelerated revenue and business growth – loans that are customised for the borrower’s individual needs and completed in days or weeks vs months.

· More attractive economics & scaled growth – origination and credit teams who can transact several times more deals per year.

· An enhanced credit and portfolio performance – larger data sets and deeper analysis enable more informed credit decisions and proactive portfolio monitoring delivers better credit outcomes.

There is a lot of competition in lending. What is OakNorth doing differently than your competitors?

The OakNorth Platform enables OakNorth Bank and its Platform customers to differentiate themselves from other lenders in a number of ways including speed (completing transactions in weeks vs the months it typically takes traditional banks), and flexibility (taking a bespoke approach, structuring deals to meet the borrower’s unique requirements which may be driven by seasonality, asset class and/or the borrower’s business plan).

In the UK, OakNorth Bank competes with other commercial lenders and emphasizes its transparency for borrowers (the bank gives every borrower the opportunity to meet the Credit Committee and discuss its borrowing needs directly with the decision makers).

Why is OakNorth focusing on mid-market businesses? What is the strategy behind this focus?

There are fintech platforms that offer loans below $1 million based on automated credit models that are quick and efficient. For larger loans, more than $25 million, banks can more readily justify allocation of resources for underwriting because potential returns are greater. Loans that fall outside these parameters however (i.e. those between $1m-$25m), are typically too large to be subject to an automated credit process (as it is difficult from a risk perspective to justify automating this size of loan); or too small to be underwritten in the way that big banks do with large loans because the potential returns don’t make it commercially viable. As a result, this segment of the market (lower mid-market businesses) has been overlooked and underserved for decades. Through our Platform, we aim to vitalize this space, enabling faster and smarter decision making across the loan lifecycle.

The global market has been pretty volatile recently due to the coronavirus and political change; how do you think the lending space will react to a possible recession and how is OakNorth prepared for this?

As a group, we’ve raised over a billion dollars from investors and because we’re profitable we’re not burning through that cash, so we’re well-capitalized to weather future downturns.

If anything, we see it as an opportunity for both OakNorth Bank and the Platform:

· During the last two recessions, many of UK’s high-street lenders pulled back from SME lending; therefore, a recession may provide OakNorth Bank the opportunity to gain more market share and support these businesses at a time when other lenders shift focus.

· In a recession, lenders concerned about the performance of businesses in their portfolio will want to keep apprised of both macro-economic signals and loan performance data in their portfolio. Our Platform’s monitoring capabilities will help them do this.

Have the regulatory requirements changed greatly for start-ups in the credit and lending ecosystem? How do you think they will change over the next 2 years?

Although there has not been significant regulatory change for fintechs in the credit and lending space, as fintechs evolve at a rapid pace, regulators need to strike the right balance between fostering innovation and ensuring an appropriate supervisory framework. I think we will see a continued focus on how fintechs address the areas of data privacy, cyber security and business continuity. There is also a social expectation that companies, regardless of regulatory supervision, act in a manner that nurtures a culture of compliance, ethical business practices and operational resilience.

Reach out to Catherine on LinkedIn.

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