The approval of OakNorth, a digital bank with a keen focus on supporting lower mid-market businesses, by the Federal Reserve and the New York State Department of Financial Services to establish a Representative Office in New York is a significant milestone. This pivotal development allows the bank to actively market its products and services across the U.S. while it explores the acquisition of a banking charter, solidifying its footprint in a market often underserved by traditional financial institutions. OakNorth’s mission since its inception in September 2015 by entrepreneurial founders has been to empower businesses with turnovers ranging from $1 million to $100 million, a segment frequently neglected by conventional banks.
Despite these lower mid-market businesses representing a mere 3.4% of all small and medium-sized enterprises (SMEs) in the U.S., they account for a substantial 25% of all SME turnover, emphasizing their critical economic role. Over the years, OakNorth has facilitated the lending of over $15 billion to such businesses in the UK and the U.S., contributing to the creation of more than 47,000 jobs and over 29,000 new homes. Most of these homes are categorized as affordable and social housing, underscoring the bank’s significant impact on job creation and housing availability.
Addressing the U.S. Mid-Market Financial Gap
The U.S. banking landscape is home to approximately 4,700 banks, nearly one-fifth of which hold assets under $100 million and feature a median asset size of $300 million. These modest asset sizes pose challenges for these institutions in meeting the sophisticated needs of scaling lower mid-market businesses. Recent events, including the collapse of several commercial banks over the past 18 months, have further exacerbated the gap for these businesses, leaving them in dire need of appropriate financial support.
OakNorth’s innovative approach, driven by data and forward-looking strategies, leverages its proprietary OakNorth Credit Intelligence (ONCI) framework to address this market vacuum. Since July 2023, the bank has successfully completed around $600 million in loans to the U.S. lower mid-market sector. This accomplishment reflects a robust demand for OakNorth’s banking solutions, emphasizing the effectiveness of its tailored approach. CEO and co-founder Rishi Khosla highlighted that even without substantial marketing efforts, the bank managed to triple its business volume in the U.S. over the past year, signifying a strong, intrinsic demand for its services.
Strategic Expansion and Future Outlook
The recent approval of OakNorth, a digital bank focusing on lower mid-market businesses, by the Federal Reserve and the New York State Department of Financial Services to set up a Representative Office in New York is a major milestone. This key development enables the bank to promote its products and services across the U.S. and consider acquiring a banking charter, strengthening its presence in an often underserved market. Since its founding in September 2015 by entrepreneurial founders, OakNorth’s mission has been to support businesses with turnovers between $1 million and $100 million—a segment often overlooked by traditional banks.
These lower mid-market businesses, while only 3.4% of all U.S. small and medium-sized enterprises (SMEs), contribute a significant 25% of all SME turnover, highlighting their crucial economic importance. OakNorth has facilitated over $15 billion in loans to such businesses in the UK and the U.S., contributing to the creation of more than 47,000 jobs and over 29,000 new homes. Most of these homes are classified as affordable and social housing, emphasizing the bank’s impact on both job creation and housing availability.
