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UK fintech OakNorth to announce platform deal with 'top 10' US bank

British financial technology company OakNorth Holdings Ltd. is about to sign a "top 10" U.S. bank as the latest client for its credit analysis and monitoring platform, which it says will help lenders work through tens of thousands of emergency coronavirus loan applications.

The platform is one of OakNorth's business lines. The company is also behind OakNorth Bank PLC, a London-based bank that focuses on lending to small and medium-sized enterprises in the U.K.

Many banks in the U.S. are struggling to manage the huge numbers of emergency loan applications they are receiving from SMEs that have been hit by the novel coronavirus outbreak, OakNorth Chief Information Officer Sean Hunter told S&P Global Market Intelligence.

Operational challenge

OakNorth sees the U.S. as a growth market for the platform since many banks in the country have under-invested in technology and need external help to interpret data and make credit decisions quickly, Hunter said.

Processing loan applications made under the Small Business Administration program has been a "huge operational challenge" for U.S. lenders, and chief risk officers at many banks have been working around the clock to make credit decisions, he said.

OakNorth does not need a banking license in the U.S. as it only provides software-as-a-service, or SaaS, rather than any lending or deposit facilities. The platform is not available in the U.K. as OakNorth does not want to risk compromising its own lending activities, Hunter said.

The market for SaaS credit analytics and monitoring tools in the U.S. is a fairly mature one, with a number of other global banking tech firms such as Fiserv Inc., Fidelity National Information Services Inc. and Jack Henry & Associates Inc. offering similar services to OakNorth's platform. Swiss-based Temenos AG said in April that it is offering an SaaS product for U.S. banks and credit unions specifically to help them rise to the challenge of getting coronavirus emergency loans out to the businesses that need them.

'Top 10' customer

OakNorth has signed seven clients for the platform in the U.S., of which it has named two — Customers Bank and Modern Bank NA.

The bank said it could not name its latest U.S. client, but a spokesperson confirmed that it was one of the country's top 10 banks by assets. The deal relates not only to emergency coronavirus loans but to the full credit analysis and monitoring platform.

Some big-name U.S. banks have generous budgets for tech spending, such as JPMorgan Chase & Co., which spent $11.5 billion on technology in 2019. But many U.S. lenders have under-invested in tech, Hunter said.

In the U.K., OakNorth was recently accredited as a lender in the government-backed Coronavirus Business Interruption Loans Scheme.

OakNorth is backed by Japan-based SoftBank Group Corp. Indiabulls Housing Finance Ltd., another investor behind the challenger, is understood to be looking to sell its $400 million stake in the company, according to Barron's.