EXCLUSIVE: "Fertile Ground" - Hugo Oliveira Sousa, OakNorth in 'The Fintech Magazine'

FF News

14-05-2025

British neobank OakNorth has definitively planted itself in American soil with the acquisition of a community bank. So what will businesses there make of it?
It may have been serendipity that OakNorth's first acquisition in the US is based in Oakland County, Michigan. But it's not just the name that should make the British neobank feel at home. Built on the back of manufacturing and tech, Michigan is a state that's proudly pro-business, with hundreds of thousands of small enterprises that fit snugly into niche lender OakNorth's target demographic of the equivalent £1million to £100million turnover.
The Community Unity Bank (CUB) acquisition, which is subject to approval, is a crucial stage in OakNorth's plan to expand across the States, having first exported its business lending model there in July 2023. Since then, it has lent more than $700million stateside, including to UK businesses in the US such as nursery brand Mamas & Papas.
In fact, OakNorth chief executive Rishi Khosla recently said demand from US borrowers had exceeded expectations, the bank lending three times more than anticipated.
In CUB, OakNorth found a kindred spirit. Both organisations were built by entrepreneurs for entrepreneurs and they both set out to address a gap in the provision of small business credit in their respective markets. Now, as trade tariffs threaten between the UK and the US, OakNorth finds itself uniquely placed to assess the risks and opportunities for both business communities.
Launched in 2015, OakNorth has never deviated from its target customers – growth-driven, lower-mid market businesses with a proven model and aspirations to grow.
Hugo Oliveira Sousa, who arrived to set up the bank's marketing operation in 2021, says: 'Until then, OakNorth didn't have a marketing team, the business was profitable from day one and was built on referrals, which is quite a feat. It is a brand built on a niche, which is businesses that are routinely underserved in terms of their growth needs. Our differentiator from other banks is that 'No one wants to pick up a phone if they don't have to. But, if you want to make a £1million transfer to buy your next business or plot of land, and a computer says no, a chatbot can't help. You need a human who knows your business.'
Sousa says OakNorth's goal has always been profitable growth. That means it has resisted the urge to move mass market, which risks onboarding unprofitable customers or such a wide range of them that the bank's customer support model becomes overloaded. So far, that's proved the right course. OakNorth's annual report for 2024 reported a pre-tax profit of £214.8million, up 14 per cent on the previous year. Loans and advances to customers rose 15 per cent to £4.42billion last year.
Last summer, the bank launched its business current account to build stronger relationships with those customers. And, as senior director, Sousa now co-leads the banking team. Since a business account is a 'commodity', he says, the platform is provided by cloud banking fintech Thought Machine, but the offer is tailored by OakNorth to meet its niche market's needs.
'If you want to make a transfer of £1million to buy your next business and the computer says 'no', a chat bot can't help. You need a human'
'When we began work on the business product we knew 60 per cent of our customers on the lending side were recurrent customers, but that's event-driven, we didn't keep a consistent relationship,' he says. 'We had customers asking us for a business account that was as seamless as their loans, so we realised it was something we could do. But there's no point in acquiring thousands of business customers if you can't monetise and support them with a product they are willing to pay for. We say clearly, we're not competing on price. We compete on premium service to meet specific needs.'
An example of those needs could be a customer who has to open a bank account fast for a special vehicle it has created for an acquisition – that would typically result in rejection from a neobank and a waiting time of months with an incumbent.
'We can do it quickly because we understand complex company structures,' says Sousa. 'Solving specific needs for specific problems that a business has is proving to be 10 times more valuable than having people open accounts en masse.'
As OakNorth is laser-focussed on the challenges it seeks to solve, Sousa says features such as the business account's AML provision and payment cards are delivered by proven third parties.
'Our app, our front office, our experience, all that is done in-house,' he adds. 'But for cards, for example, why spend millions developing that technology when it's already there and you can plug and play? Our data platform is proprietary, so we develop that. It's connecting our systems and that's an important point.
'If you go to one of the incumbents and ask for a business loan, it's a completely different unit to when you go to open a business account. All these systems are disconnected. But a customer is a customer – a business owner may have six different businesses and is probably saving with us at a personal level. So having a unified view is important for our experience and it's something that we want to control.'
OakNorth will be hopeful its niche focus will win favour with the US's small to medium-sized businesses, while being protected from defaults by its commitment to building holistic customer data – something that CUB will give it a headstart on in Michigan. After all, community banks have a long tradition of knowing their local users well in a vast country.
According to umbrella group, the Independent Community Bankers of America, they provide 60 per cent of small business loans under $1million and 80 per cent of banking industry agriculture loans. And that strong local focus, designed to create and maintain wealth within the areas they serve, is traditionally built on local knowledge and community activism.
Community Unity Bank was created in 2023 as a reaction to a decline in local banks and industry consolidation, plus a perceived lack of personal service and empathy during the economic crisis of 2008 and the COVID pandemic. With parallels to OakNorth, it brought together entrepreneurs from around Oakland County to meet a need for small business lending and aims to be 'client-centric and service driven' while 'deploying state-ofthe- art technology that is easy to use'.
Its team has worked hard to establish relationships with businesses in the south east of Michigan while providing loans for business expansions and bank accounts to both businesses and individuals. A recent survey by McKinsey of 1,200 American SMEs found their most important criteria when selecting a primary bank was robust relationship management followed by the availability of online and mobile tools.
With a commitment to offering both of those, the combined OakNorth and CUB teams promise to be a powerful force in a state that is all about expansion. As Henry Ford, one of Michigan's most famous entrepreneurs, said: ''If everyone is moving forward together, then success takes care of itself.'
This article was published in The Fintech Magazine Issue 34, Page 51-52