OakNorth, a new challenger bank hoping to change the way businesses finance growth, has launched its first two savings accounts.
Its CEO, Rishi Khosla, has said OakNorth will aim to lend £1bn to small and medium-sized businesses over the next five years, as the bank was given the green light from the PRA and FCA to offer retail deposit products – 15 and 30 month fixed-term deposits, with interest rates of 1.85 per cent and 2.10 per cent.
OakNorth said these would provide funding that will enable it to offer loans to small businesses which are seeking growth.
Khosla pointed out that small business lending is down £5.2bn compared to last year – in spite of growing confidence and appetite for borrowing. He hopes the opportunity to support such businesses will be an added incentive to savers. “Ever since the seed was planted for OakNorth several years ago, we have worked tirelessly to create a bank that specifically meets the needs of small business owners,” Khosla said.
He feels savers “play a pivotal role in this”. Khosla added that the introduction of the aforementioned accounts “is an important step forward for us as we begin to shake up lending to smaller businesses”.
OakNorth is seeking to differentiate itself from other challengers, by investing in modern systems and technology and combining this with traditional banking and lending skills. Khosla hopes this means the bank will be able to deliver faster service and decision-making, alongside more competitive products and improved customer experience.
The bank’s goal is to make waves in an increasingly competitive market – focusing on filling the gap of lending to small businesses. Khosla added OakNorth will be an option for the many smaller firms which lack the property portfolios needed to obtain a loan or just don’t want another mortgage. His bank offers loans that are secured against multiple collateral types – not just property.
The rise of challenger banks like OakNorth has seen numerous changes and the diversifying of options available across the financial sector. The growing presence of these lending organisations has also resulted in the recent questioning of whether new tax changes introduced by chancellor George Osborne should also apply to these new players.
A delegation of leaders from some of the UK’s challenger banks, including Metro Bank, Aldermore, Secure Trust Bank and OneSavings Bank, met with officials in an attempt to convince them that the new bank tax should exclude smaller lenders. It imposes an extra eight per cent levy on banks with profits above £25m.
They weren’t successful, though the Treasury said it may consider some adjustments to lessen the impact on smaller lenders. Secure Trust Bank’s Paul Lynam, said the outcome was “frustrating” as challenger banks looked for further action to “match the words on fostering competition and creating a level playing field”.
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