Digital bank OakNorth is expanding its business beyond the United Kingdom and into the United States, exploring a merger and acquisition strategy. 

“We’ve always been clear that we want to build our business across the U.K. and U.S.,” Chief Executive Rishi Khosla told Bank Automation News.  

The timing is right: Since its inception in 2015, the London-based digital bank and vendor of cloud-based lending solutions has surpassed 10 billion pounds ($13 billion) in lending to businesses, and credit losses have stayed below $8 million, Khosla said. 

In addition to growing its digital bank, $4.8 billion OakNorth is looking to the U.S. to fill the lending gap for underserved lower- and middle-market entrepreneurial clients following the regional banking crisis of 2023, Khosla said.

OakNorth was an unsuccessful bidder for Silicon Valley Bank U.K., Khosla said, noting, “We were very close to the situation.” 

The gap in the U.S. market opened by the demise of SVB, First Republic Bank and Signature Bank represents a customer segment OakNorth could fill, he said.

M&A strategy

How will OakNorth grow in the U.S.? 

Two ways: Identifying customer overlap of clients in the U.K. and the U.S., and exploring M&A opportunities, Khosla said.  

OakNorth is looking to identify companies already servicing the lower and middle markets that offer more than just credit. For example, a company with operational mechanics, payments and cards “becomes very interesting to us,” he said. 

Such an acquisition would “accelerate the widening of our offering,” Khosla said, noting that a bank that could allow OakNorth to start taking FDIC insured deposits would be of interest. 

OakNorth joins Bristol, U.K.-based clearing and embedded finance service provider ClearBank, founded in 2015, in its push toward the U.S.  

ClearBank Chief Executive Charles McManus said the bank has already applied for a banking license in the Netherlands and hopes to launch in the U.S. by 2026, as first reported by Bloomberg News. 

U.S. presence

OakNorth’s U.S. push is already in action, Khosla said. 

In fact, OakNorth provided $200 million of gross new lending facilities to businesses in the U.S. in the second half of 2023, he said.  

But until the representative office application goes through, the bank cannot have a physical presence in the U.S., however, “we’ve got that process in play,” Khosla said.