OakNorth: A Blueprint for Future Bank Success

Jim Marous:
Hello, and welcome to Banking Transformed. I'm your host, Jim Marous, owner and CEO of the Digital Banking Report, and co-publisher of The Financial Brand. Small businesses are becoming big businesses in banking, and commercial businesses are completely underserved in the marketplace. Unfortunately, most of these organizations have trouble getting fast and flexible financing. Founded in 2013, OakNorth is a FinTech bank that focuses on making loans to small and medium-sized businesses in the UK.

Jim Marous:
Beyond launching a neobank, OakNorth has also been credited with building lending technology for other financial institutions that delivers credit solutions up to 10 timed faster than traditional models. We are fortunate to have Jackson Hull, COO at OakNorth on the show today. He will discuss the origin of OakNorth and how this FinTech has grown to be one of the most valuable neobanks in the world.

Jim Marous:
I would hazard a guess that OakNorth is a relatively unknown entity for most of my North American listeners. As a quick overview, this UK-based organization has focused on meeting a significant market need for very relatively, very neurosegment, creating, selling high proprietary technology, recreating a high-tier team with future-focused founders. And most importantly, their profitable. Their question becomes what is their recipe for success and what is next for this unicorn neobank.

Jim Marous:
As I mentioned, I'm joined today by Jackson Hull, COO of OakNorth out of the UK. Welcome to show, Jackson. Before we dive into the business model of OakNorth, could you provide a brief history of the company and what sets OakNorth apart from your competitors and neobanks?

Jackson Hull:
Yeah. Jim, thanks for having me. I'm really looking forward to the conversation. Yeah, I guess the brief history of OakNorth starts with the founders, Rishi Khosla and Joel Perlman. They founded a company in 2005, in fact, called Copal Partners. And this was a research company doing financial research for banks. And while they were growing that business, they were approaching high-street banks looking for good debt financing to help grow this business, but they kept confronting the computer says no response.

Jackson Hull:
And what they were finding maybe not then but on reflection was that the deal size, the investment they needed in terms of loans, was not enough for the bank to focus on them. And it was quite frustrating, obviously and left the bit of chip on their shoulder as it were. They eventually sold this business after growing it to about 3000 employees to Moody's in 2014. And that memory stuck with them.

Jackson Hull:
So, they got the first banking charter in about 150 years in the UK and went about building a bank that could cater to what we now call the missing middle. And these are growing businesses, revenues, typically $1 million up to $100 million who are in need of growth capital from banks but haven't been able to be served at least in the last couple of decades by traditional commercial banks. So, that's the mission that OakNorth has been on.

Jackson Hull:
In that time, went about 9.5 billion to neighborhood businesses. These are businesses that don't just help our neighborhoods, but also grow employment. And really, these are the businesses that you can associate with just that your neighborhood. So, it's a really, really great mission that we have been on. And because of the way we do things, the inspiration of the founders to look at each of these businesses with the data lens, really, really look at what makes these businesses tick, what drives businesses across many, many subsectors.

Jackson Hull:
The results are very, very good today. The company has not had a write-off. We've had several defaults. We'll probably have a write-off this year, but in the history of seven years of the bank, it's quite a feat. And we owe that to this style of analysis and ultimately, a real keen focus on monitoring and working with clients after the loan has been made. So, that's the quick and dirty history.

Jim Marous:
It's interesting. We look at the growth of FinTech and almost every FinTech is an organization that's trying to serve a segment that's been underserved by traditional banking. Now, it's not like these segments just appeared out of nowhere. These segments have always existed, but I think it's because financial institutions have two dynamics that work against them in serving these micro-segments and they're not really all micro.

Jim Marous:
Well, one is the focus on risk avoidance as opposed to risk monitoring or trying to manage risk as opposed to avoid it completely. And secondly, the slowness at pickup on the use of data and analytics to analyze business opportunities. And I think OakNorth is a great opportunity or a great example of an organization that said, "Okay, number one, there's a missing link here and that small businesses become less and less served, especially since 2008 when there was the recession."

Jim Marous:
And organizations said, "You know what, rather than take that risk, we're going to avoid them." In addition, they've not taken up the other side, which said, "If I knew more about them, I may give them a loan." And so, can you discuss a little bit about why this market not only is so big that you can't be a focus for a major financial institution but also on the needs of these organizations?

Jackson Hull:
Yeah, no, I think it's a great insight, Jim, that the reality is that large banks don't have internally analytical capabilities or access to data to be able to understand how these businesses work. And we look at that at OakNorth. And what we try to help other customers, other commercial banks with is instead of talking about all the why not, why can't we loan, right? What is our risk threshold? It's actually to say, what are the ways we can find the path to yes by learning more about each business, right?

Jackson Hull:
And key to Oak North's success, the banking side, our financing product, has been the ability to find really great high-margin deals with underserved businesses that are ripe for these types of loans. The trick, of course, back to analytical and data capabilities is you got to build that muscle and you have to be able to think about how can I get a quick decision? How can I improve the experience through origination?

Jackson Hull:
The average... Yeah, just let me dig quick aside, the average loan application takes 40 days in the USA to come back with a yes or a no. And as you can guess, it's more often a no than a yes. Right? So, we're looking to do this instantly through our credit intelligence suite, a software that brings to bear all of that data and the power of analytics to give you really, really clear signals about how a business performs and gets at what makes them unique.

Jackson Hull:
We happen to put the world into 273 subsectors of the economy. Now, that's a broad, what we call CNI portfolio view if you think about it in that way. And each of those subsectors has different drivers, things that make those businesses tick. And through analytics and machine learning and lots and lots of data, we're able to provide a forward-looking view of what a growing business is going to look like in 12 and 24 and 36 months, rather than the current state of play in commercial lending, which is what's my spreadsheet say about the past performance, right?

Jackson Hull:
It seems strange. This is a growing business. If they're growing 20% year on year, next year at this time, they're going to be 40% larger, right? It's like you got to be looking forward, which is really what our platform is good at providing the commercial bank when you look at a business way down in one of these granular subsectors because it's all about understanding the nuances of each of those sectors to be able to come up with a really, really good projection looking forward.

Jim Marous:
Well, it's interesting. Your organization is part of the building of your organization created some really innovative platform as a service technology that not only made your business better but really it's given you a new set of business models or an expansion to your business model to sell this technology to both FinTech and traditional financial institutions globally.

Jim Marous:
Can you talk a little bit about this software, but even more importantly, how this outgrowth of this technology is really working to expand your marketplace beyond simply giving those of small businesses?

Jackson Hull:
Yeah, absolutely. Absolutely. Yeah. And that's a good summary. I think I would only add that, really, the vision was always to change globally, the landscape of commercial lending, and get money into the hands of worthy entrepreneurs. So, in many ways, the science that went into building the first financing product that OakNorth bank in the UK sells was an easy transition to say, actually, this should be codified literally in code. And we should sell this and license it to other clients because that gives us a 10 X approach to our mission, right? Much more leverage by enabling banks that already have the capital, that already have relationships to lend faster, lend smarter, and lend more to this missing middle.

Jackson Hull:
So, it really was an extension of that. And what we did was maybe just take a half step back, Jim. You talked earlier about, hey, the pace of change is so slow. And I think that's right. Although if you look back at, say the last 10 years, there's been pretty good pickup of maybe the first-order systems in a commercial bank. Loan origination systems, for example, have come online and have had good adoption.

Jackson Hull:
Core banking systems have been upgraded. But what happens in between has not really changed, right? Lots of spreadsheets, lots of PowerPoints, right? And that's where things are starting to break down. So, we see this as coming into that space and being able to make things more efficient through our software platform. So, today, we break our platform into four key components. The first one, we call portfolio insights.

Jackson Hull:
Think of this as an inch-deep mile wide view of your portfolio. Right? Think of a heat map. Where should I be watching out? Right? If I look at my whole loan book, what sectors and which borrowers actually are most susceptive able to a transition climate risk, for example, or a recession or another pandemic, for example, right? And by inverse, where are my opportunities? Where do I have really good margins, right?

Jackson Hull:
And looking forward, remember, it's all about forward-looking, where are those opportunities going to emerge based on scenarios that I can play with in the platforms? All about the forward look. So then, we think about the deal structures and we have a credit analysis module, and this is all about getting those faster decisions by bringing lots of data together.

Jackson Hull:
So, this is a forward-looking forecast based on what we know about makes businesses tick in a given sector meshed with the data provided by a customer about their borrower's performance, right? What's the revenues like? What's their cost like? What's the shape of that business essentially? And we do that by applying a few lenses, a view of the sector, how's the sector performing, and what does it look like, it's going to do over the coming quarters and years?

Jackson Hull:
What about peers? How does this business perform relative to businesses like it? So, we've, again, sitting on top of lots of data. We have very, very many examples in using machine learning. We can predict how businesses like this one are going to perform. So then, once loan, now it's back into monitoring. Jim, you mentioned, this, whatever, this ignorance around not wanting to monitor, which makes a lot of sense, right? It's like a risk continuum in many ways.

Jackson Hull:
And our monitoring tool allows banks to actively monitor those loans. We look for early warning indicators. And importantly, this is back to your question about what makes us a bit different than our competition. Hard to find a true competitor from us. But in this instance, these are early warning indicators that we have learned or indications that a deal could be getting in trouble. Maybe not this month, maybe in six months' time.

Jackson Hull:
And in fact, these are the indicators that are key to salvaging deals, right? The reason we've had defaults but no write-offs is because we catch them earlier using our software than a commercial bank, which may only catch them when there's a breach of a covenant, which is way too late. So, we're able to restructure and work with them.

Jackson Hull:
And then, the last component, which we're super excited about and we'll talk a bit about, I think, is climate impact framework. So, think of this as that basis that we just talked about of looking at your whole portfolio, diving deep into a particular deal, and then monitoring across time now apply a lens of climate risk. Right? Really, really important for all the reasons we know. It's a humanity risk, existential risk.

Jackson Hull:
But so many businesses will be impacted both directly and indirectly from climate change policy and actually, the actual physical changes in our climate. So, we're really, really excited about that part of our software as well. So, that's what we offer in our credit intelligence suite.

Jim Marous:
Yeah. And so, question, when you're selling software to a traditional finance institution, do you find them normally buying it more because of your risk components of it, the way you monitor risk, manage risk, assess risk on an ongoing basis? Or do some of them even look from an opportunity standpoint on how... The beginning of your organization is going to people that weren't getting lending in the past.

Jim Marous:
And I find that traditional finance institutions continue to look at the risk elements saying, "If you can give me software that can help me monitor and manage risk over time, man, I'm going to buy it." And if they miss the other side of that, which is the opportunity expansion by looking at additional credit risk tools that allow you to go deeper in a file to be able to offer that, how do you see it?

Jim Marous:
I know you sold the software to some companies in the US. What really sells them? Is it the risk side or the opportunity side?

Jackson Hull:
Yeah. It's an easy answer to say both, but I'll explain why. It comes back to what we offer as a forward-looking view. Right? So, it's that depth of understanding to satisfy their risk requirements instantly, rather than taking a week of research and another week of analysis to produce a risk score on their side. They can get that instantly. It's the depth of the file that's instantly available, but then it really, back to opportunity, whether you're talking about a discreet deal or looking at planning, portfolio planning, you can use our forward-looking views to really get a good perspective on your risk in the quarters ahead. Right?

Jackson Hull:
We hear a lot from, in particular, US customers about opportunities missed, right? And when you're looking backward in the rearview mirror, you don't know which way a particular sector is going to turn. Right? But we can give you an indication because of our forward-looking view. Because of the health and depth of our data sets and our data science and analytics, we can tell you which way the wind is blowing in a given sector for example.

Jackson Hull:
So, right now, some of those are obvious. Let's not invest in oil and gas, right? Those are obvious and humanity can do that. But there are other factors. Think about just the changes in a pandemic. We saw, for example, outdoor activities like golf courses, right? They have really different economics but are really well-positioned for pandemic activities. Right?

Jackson Hull:
Humanity went through a major shock. We didn't have that awareness, but if we think about a world where pandemics may come back, those activities are going to probably be better off than, say, bowling alleys. But a traditional commercial bank would say, "That's leisure and it's too risky. We're out of it." The whole thing is leisure. It's this big block of an industry called leisure.

Jackson Hull:
Whereas, our data, the analytical packages on top of it and the way we classify our sectors will have the golf course and the bowling alley fundamentally separate forward-looking views based on the granularity that we can get to in a portfolio.

Jackson Hull:
So, yeah, it really is all about the forward-looking view, which lets you deepen the risk view, but also think about where to go, where should you be in two to three years' time? Yeah. That's what they come for.

Jim Marous:
How have you determined where to focus your efforts, but more importantly, what types of businesses and accounts have you been most interested in and what have really been surprises, coming out of the pandemic, you've mentioned golf courses? But that flow is an ebb and flow based on the marketplace. You've talked about the global with regards to the environment, things of this nature.

Jim Marous:
What are some of the areas that your organization as OakNorth, not other organizations you sold the model to? What have really been your focus as an organization?

Jackson Hull:
Look, at the beginning of the pandemic, there was a shock and a fear about the risk of, in particular, leisure hospitality in particular being affected. I think one surprise we saw there was the difference between European and UK and US hospitality businesses. I'll include restaurants in that for a second. And there were just wildly different approaches to how those businesses were supported from a government perspective. So, it was really easy, or I would say easy to model through data the health of restaurants in UK even during a lockdown and a shutdown.

Jackson Hull:
Whereas in the US, it wasn't clear exactly how those restaurants were going to be supported if at all. So, the regional differences I think were quite a surprise. And maybe that you could chalk that up to supply-side shocks globally. We'll have wildly different responses from regulators. I think where we see now this focus on climate, just being fair to banks, climate was always on the agenda, but COVID sidetracked it. Right?

Jackson Hull:
And I think we're now seeing a resurgence in saying, "Wow, what did we learn coming off the backs of a pandemic?" We better get serious about climate. Right? And how are we looking, not just at our own portfolios, but our own businesses. Are we running sustainable businesses? Are we lending to sustainable businesses? Where are those sectors?

Jackson Hull:
I mentioned oil and gas in our portfolios that are subject to transformation because of either policy regulation or maybe harder to grasp, but something we model day in and day out is demographics changes and preferences and consumer behavior. These are things that are really top of mind for our customers in the USA and also in Europe.

Jim Marous:
Your organization has found an answer to two primary challenges that most FinTech firms haven't been able to answer, which is profitability and scale. How do you continue to build momentum in the marketplace? How do you take advantage of what has worked for you in the past to continue to grow and continue to generate a profit when basically most FinTech firms haven't mastered either one?

Jackson Hull:
Yeah. Look, the short answer is stick to our values. Right? We have a way of building, of collaborating internally, of working day in and day out to serve the mission of the company. And out of that spring, different ways of working. One risk to scale, Jim, in a FinTech is you just get big. You get a lot of people. Process takes over and you don't feel like a startup any longer. Right? And that's something we watch day in and day out. Right? And I think that's probably the first answer. It's hard. It's hard.

Jackson Hull:
And it takes a lot of experience, a lot of leadership to be able to communicate that to the workforce that we're here on a mission and we're trying to drive increasing scale. I think in terms of profitability, this is the acorn, at the center of it all is really robust and rigid analytical approach to underwriting deals in our financial product, but also to providing that analytical service to our software customers. Right?

Jackson Hull:
And as long as we continue to invest in that area, we know that we'll continue to outpace in any other alternative that our customers would have, whether they're our borrowers for the financial product or our customers who are licensing our software product.

Jim Marous:
Well, you've diversified your business model quite a bit, and you've also because of the way you look at and analyze small businesses, the world is your oyster, versus any business can be a client of yours. The reality is you really focused on focus as well. While it looks like you can go after anything with the right model, there's still a very strong monitoring of focus of what your businesses isn't. So, it's a balancing act a little bit.

Jackson Hull:
It is. And focus is both an enabler and a killer of startups, right? So, we're really focused on owning that portion of, call it the commercial bank operating system that is about analyzing and monitoring of loans. That's where we want to live. And back to focus, we constrain our target customers, in fact. We look for loan books of a particular size. And we look for loan books that... Actually, we're using the term small business here has a different definition in every country, by the way.

Jackson Hull:
We're actually not today focused on SMB lending or SMB banks, banks that do SMB lending. So, businesses less than a million in revenue, right? Mom and Pops. That's actually not a focus area for us. Maybe we'll get there, but we know that we got to stay focused because if we try to be all things to all people, that can be death now. So, it's a very good point, Jim.

Jackson Hull:
So, we're focused on the missing middle today mostly in the USA, although our European clients are obviously important to us and focus is really, really, really key.

Jim Marous:
As an established FinTech. And you have a very strong track record, and you referenced the people aspect of everything you're doing. How do you retain that challenger mindset that got OakNorth to where it is today? How do you keep that innovative spirit but most importantly, that challenger mindset? We're starting to see some FinTech firms that are already starting to look more like legacy financial than they are looking like FinTech.

Jackson Hull:
Yeah, yeah, yeah. It's hard. It's hard. And it goes back to the founding values and reiterating every single day with our employees what our values are. And with the mission and focus, we have values, for example, like zero-base, where we have strong, I like to say we have a strong conviction for a week. Right? But then, we look back and we go, "Are we doing the right thing by our customer? Are we doing the right thing for our commercial objectives? Are we doing the right thing for our employees?"

Jackson Hull:
And just because we were doing it last week doesn't mean we have to continue. It doesn't mean we shouldn't change. Right? So, trying to optimize that and make that a part of our DNA as something. As leaders, we have to do day in and day out. I think also, the momentum that this business has is really kept up by the quality and caliber of people that we hire.

Jackson Hull:
We can be accused of having a very tough hiring process. It's fun, but it's just difficult in terms of getting to a conclusion to an offer to join. And that's important because you have to really make sure that you're hiring people who are driven by the mission that OakNorth has and you know will be successful in whatever role that we're bringing them in.

Jim Marous:
Before we take a break, I want to recap some things for my audience and not to get too... I'm hoping that people can see beyond the business that you do and look more at the way you do business. Number one, you're based on data analytics, the foundation is data analytics. Secondly, it's managing risk, not avoiding risk. And that's such a big, huge deal right now. A focus on people, you just mentioned it, the focus on hiring the right people.

Jim Marous:
But then, keeping them in the right mindset to allow you to grow the business further, to look at marketplace opportunities. If you have, for instance, software that works well for you, how can you then franchise, for lack of a better word, out to others so that you can actually expand the risk model and take less risk going forward and then most importantly, focus?

Jim Marous:
It's interesting when I did research on OakNorth. While it looked like initially, they were very focused on the medium-size businesses and where their beginning was, they've expanded but still kept a very narrow focus on what they're doing in their business. So, the way you're doing it, who you target may differ, but it's how you're doing the business that keeps your focus.

Jim Marous:
Many believe that a challenge may be on the horizon with regard to credit focus as interest rates rise. How do the pandemic impact your business, and what is OakNorth doing to prepare for a business model that may be radically different if interest rates rise and the marketplace may have potential defaults and even slower loan demand?

Jackson Hull:
Yeah, no, it's a very good question. I think you can almost generalize that into what's the next big challenge in the financial markets. I think I already mentioned the track record that the financing product offered by OakNorth bank has in terms of its resilience and our plan is to continue and even deepen our analytical approach to monitoring to reduce any potential impact as we come out of the COVID pandemic. And I think the question about rising interest rates is a great one.

Jackson Hull:
Anytime there's uncertainty ahead in analytics platform that gives you a forward-looking view that you're able to tune across different scenarios, different interest rate scenarios, for example, can bring lots of good insight and lots of good foresight really into our customers' future risk view, and make really, really critical decisions across the time horizons of quarters years, how do they need to rebalance their portfolio in light of an interest rate rise, for example.

Jackson Hull:
So, I guess there's a long way of saying when there's volatility or really uncertainty ahead, that's actually when our software is most important and valuable to our customers. If we were at or near the peak of a credit cycle, it's not as enticing, frankly, right? There's not as much of a need for a tool like ours. So, again, that forward-looking view and the importance of being able to look ahead at a very granular level to predict across various scenarios, how a business or a sector's going to perform is really where we shine.

Jackson Hull:
So, I think actually, whether it's high-interest rates or a recession, or a localized or regional recession, these are things that our platform can be really, really good at helping our customers figure out what our tough decisions in the months and years ahead,

Jim Marous:
Well, it seems traditional financial institutions often get into a post-mortem mode where they look at what it went wrong. You're really doing a pre-mortem, where you're really saying, what are the different ways that this thing could blow up and how do we avoid that going forward, don't you?

Jackson Hull:
That's right. Look, in a traditional sense, commercial banks would have an annual credit review cycle. And they'd look at all their deals, including the ones that busted, and you're right, they would sit down as a credit team and say, "Here's what went wrong. And here's what we can learn going forward." We like to think that actually, our platform or software is giving you a review every minute of the day. Right?

Jackson Hull:
And it's bringing to the fold, not just issues that are happening today. I mentioned our early warning indicators in our monitoring platform, but also forward-looking indicators. Is there trouble on the horizon in this sector or this region across a number of scenarios that they can also tune? So, yeah, it's changing that mindset of let's look backward into a post-mortem and, yeah, let's do a pre-mortem.

Jackson Hull:
What are the conditions under which this business will be in trouble? And let's then assess whether or not those conditions are likely unlikely, how likely they are? Right? And have that bring to life instantly through software and obviously through our rich data and analytics. So, yeah, it's a great way to describe it, Jim.

Jim Marous:
Well, what's interesting too, is your data analytics side also, as opposed to saying, I'm going to get rid of this customer, can actually work towards helping them in their growth prospects. If you know more about them, then maybe you even know about themselves than the risk in the future.

Jackson Hull:
Exactly, right. Now in our financing product, working day in and day out with our borrowers for the last seven years, there have been many, many instances of that very thing where we've had borrowers come to us and say, thank you for flagging. What could be cashflow problem in a couple of months' time? We had a hospitality business that wasn't aware that there was a large project, multi-year construction project about to kick off right next door.

Jackson Hull:
And through our own monitoring, we flagged it and we told them about it. They were able to minimize the impact. I think they rearranged their entrances, that thing. These stories abound, and it's all about bringing that to life both internally, but also realizing you're right that a deal is not lost, right?

Jackson Hull:
Businesses and economies run into trouble. You just got to be conscious in working as a partner with your borrowers, whether that's our own borrowers or our customers' borrowers on the other side.

Jim Marous:
Is there a technology play here for your customers as well? I know you sell the financial institutions, but it sounds like you're doing better analytics on your customers than your customers can do for themselves. And this becomes a win-win. If you had some software that you could actually provide to your clients on the front side that said, "This helps to analyze your business and that would help your business make it, so your credits go better as well."

Jackson Hull:
Yeah. One thing that's quite interesting, think about this, the thing about being a mid-midsize business is you're very rarely able to find a comparable. It's really hard, right? It's like size, space, operating in the same location. It's really hard to find. It's not like the large corporates. So, what's been really useful feeding back to our borrowers is how do they perform relative to other businesses like them, like a sense check, right? How are you doing? Right? Is your debt, or your debt ratios good? Are they bad? Are they okay? Are they right on target from what we've seen? Right?

Jackson Hull:
And our software, our platform produces those results. So, we haven't today offered that up as a software solution, but we do offer that, I guess, as information to our relationship managers. And we know that that's important to our clients on the software side as well. Right? Gone are the days, whereas we have a relationship manager. You got nothing to talk about with the bar. Now you've got something to talk about. Right?

Jackson Hull:
You can say, hey, here's what we're seeing through our research. Right? Your sector looks good, right? Your nearest competitor, maybe we loan to them. Maybe we can just find that in our data. Here's how they're performing. Right? And it's like as an owner and operator of a midsize business, that's really, really valuable information that they can't get anywhere else.

Jim Marous:
Well, it becomes a win-win too, because obviously helping them helps you. It keeps your relationship intact.

Jackson Hull:
Completely.

Jim Marous:
In December of last year, you acquired a small business, a firm, small business marketplace. How important strategically are these types of acquisitions? And do you see this as being a part of your future growth?

Jackson Hull:
Yeah. Look, we would call it inorganic growth, which complements our organic growth as we scale. They're important. They really are. And when we look at, you're referring to the Fluidly business, which is public, but we look for a few, really critical components. And probably the first off is do we have a shared mission. And Fluidly's mission is spot on dead center of our own, right? It's by providing open access and better access to financial information from small and medium-sized businesses, getting better access to capital, better access to loans.

Jackson Hull:
So, the pairing was obvious in our financing side of the business. Right? Which is that gives us even better perspective on small and medium businesses. It also gets us dipping our toe into small businesses like we talked about. But on the software side, it also gives us a robust understanding of how to process and provide analytical outputs for that data. Right?

Jackson Hull:
This is a data set of small businesses that we haven't catered to. We've really focused on the midsize businesses. And you can imagine, Jim, they're totally different, the way they operate, right? The cash flow pictures are way different. So, it was really, really good pairing.

Jackson Hull:
And I guess the last point maybe most importantly is we look very intensely at the people, right? Who comes with an acquisition? We got to make sure that there is lots of synergy, lots of shared vision, and of course, a good value set that we can all fall back on. So, that's the way we view it I think across those three lenses.

Jim Marous:
So, looking into the future, what do you see as areas of future expansion? Is it expanding the services you offer, finding new markets for the services you already provide, building a broader set of partners for your technology, or a combination thereof?

Jackson Hull:
Look, we think the total addressable market for the solution that we're building now without expanding its scope is something like $7 trillion.

Jim Marous:
You have a way to go.

Jackson Hull:
There's, yeah, a lot of ground to be gained. And there's a lot of latent opportunity that we know we should own because that's how we achieve our mission most quickly. I think actually interestingly, what we'll probably see, because we hope and expect that the pace of momentum of transformation within large banks is going to increase. So, we actually think that there could be a world where, like all software, actually, where many of our services are shared in that sense, as opposed to delivered as SaaS or a platform as a service.

Jackson Hull:
There are elements that are addressable within other systems, for example, right? Can we provide instant analytics or deal scores or whatever into a CRM package, for example, a Salesforce, or something like that? I think we're very much open to the idea that, across the coming years, really, being able to plugin, in different places in that life cycle could be valuable to our customers.

Jackson Hull:
But the core analytical engine and the power of our data science and the data that we bring to bear will still be the center of that, the acorn as I described it.

Jim Marous:
So, if we look at the big picture, what do you think is the biggest opportunity in the banking industry today as we look forward and are hopefully getting out of this pandemic stage?

Jackson Hull:
Even in light of rising interest rates, I think the real opportunity is to embrace and invest in customer experience. So, for commercial banks that's... Look, we know it, the experience is terrible. So much opportunity to really revolutionize your brand, revolutionize your reputation in the market, in particular with your current former and future borrowers, that is the place to focus. Right? And technology plays a huge role in this. But so does mindset, right?

Jackson Hull:
It's really about maybe switching from this view that borrowers come to you and then you're the gatekeeper. It's thinking about how do I maximize the chances that I can find a good deal and be the one that they come to for their next deal? Right? It's all about, I think maybe having a bit more retail mindset, right? Thinking about how do you get your customers through the doors and how do you service them quickly? Right.

Jackson Hull:
Don't make them wait 40 days for a no, right? How can you improve this experience? I guess this is a long way to say, Jim. There's just not been a lot of focus around making that experience better. And I think it's a huge opportunity for commercial banks to really stand out.

Jim Marous:
It's interesting, because satisfaction surveys and everything indicate we're not doing bad as an industry, but the reality is if they don't expect much of you, then they give you passes. And we were talking about it yesterday, having an account opening process in the retail bank that takes 15 to 20 minutes is unacceptable in anybody's mindset, especially in the digital world. And yet somehow we keep that going, the commercial, the small business areas. I'm a small business.

Jim Marous:
And the lack of any proactive thinking on behalf of my financial institution for my wherewithal is a major opportunity. And again, what you've shown, as OakNorth has shown is the power of data analytics is the core of everything. It's the core of better experiences. It's the core of profitability. It's the core of focus and the core of keeping that challenger mindset.

Jim Marous:
And if organizations, no matter what business they're in, no matter what markets they serve or where they're located, look at those opportunities and also realize that sometimes it makes sense to partner with an organization that has that mindset that can get you over that hump in quick style.

Jim Marous:
I know some of your clients in the US, and I know that you've completely changed their mindset in that segment of the business and actually had other segments of the business within those organizations look and go, "We need some of that." It's rethinking the way you think about banking.

Jackson Hull:
I think you're right. I think you're right. I just didn't want to lose this last point, Jim, because it's an important one. If I was a CIO at a bank, I would be thinking about that world of composite, finding the best deepest specialist you can find and plugging them in, in the right place, not trying to build the capability in-house, not every capability I should say. Focus on what matters to you as a commercial bank. What sense-

Jim Marous:
What you're best at. Because the problem is you can't do it at speed. If I'm in the commercial lending space, it's better for me to partner with an OakNorth than it is for me to try to build from within or with anybody. I also tell people, "Stop looking for the perfect solution because this perfection is the opposite of being able to innovate because you're going to take too long to do it." You're never going to get there.

Jim Marous:
And I also use Chase as an example, Chase in the UK. They partnered to build their mobile banking platform there. Why? Because to build themselves would've taken too long, and speed, and getting to market quickly is the key right now. I think you're right, we have to look and say, if I'm the CIO, if I'm the retail banking, whatever it is, who can I partner with to get this out in the marketplace, not in 2022, but by second quarter, that type of thing?

Jackson Hull:
Yeah, no, you're totally right. And partner is the word as well. I think that's also a feature of... I think Fintechs generally do a better job than traditional enterprise software companies because we know that, you said it, there is no perfect solution, but you can try to achieve perfection as a partner, right? Knowing that most banks are in some a transformation, every bank has a slightly different set of needs and partnering is really important.

Jackson Hull:
How can we make sure that we're successful in implementing, in our case, our software with each and every client that we'd like to try to think about ourselves as long-term partners? It's a really, really key feature whereas larger enterprise software companies don't have that view.

Jim Marous:
Jackson, I can't thank you enough for being on the show. It's been a while that we've been trying to get you. And it's interesting because it, again, shows that we've got to go, for us in the North American area, have to go beyond our borders to see some of these really great success stories that are out there, and then see how it can fit in, not a neobank model, but in a traditional bank model. So, again, I appreciate your time today and hope everything's going well.

Jackson Hull:
Thanks, Jim. Appreciate it.

Jim Marous:
Thanks. Thanks for listening to Banking Transformed, raised to top-five banking podcast and winner of three international awards for podcast excellence. If you enjoy what we're doing, please take some time to give us some love in the form of a review. Finally, be sure to catch my recent articles on the Financial Brand and the research we're doing for the Digital Banking report.

Jim Marous:
This has been a production of Evergreen Podcast. A special thank you to our producer, Leah Longbrake, audio engineer, Sean Rule-Hoffman, and video producer, Will Pritts. I'm your host, Jim Marous, until next time. Remember, your focus is unlimited. The irony is that real power comes from how you narrow it.