Technology shapes many of the companies around us, and banking certainly isn’t being left out of this change. With the rise of mobile-led neobanks people are expecting more digital services from their banking providers.
As one of only 30 new UK banks authorised by the Bank of England Prudential Regulation Authority since 2013, we understand the high standards needed to secure a license. And even with a license secured, we know we need to demonstrate to you why we’ll be the best lender to fund your loan. This is why as a bank we’ve embraced technology from the beginning, and adopted a unique approach to commercial lending by using OakNorth Credit Intelligence.
How we use tech in our lending decisions with OakNorth Credit Intelligence
Since the beginning, we knew that we wanted our credit decisions to be guided by granular data and intelligent insights. This wouldn’t mean that tech or artificial intelligence would take the place of our highly-skilled Credit and Risk teams – their years of experience and intuition can never be replaced, and we’re all for prioritising and nurturing our in-house talent.
But we did know that our team’s time was best spent understanding the unique needs of our customers. And if we could use technology that could take into account the wider geopolitical and economic context, they’d be able to make better decisions led by historical outcomes as well as a forward-looking view.
Credit Intelligence is a data-driven approach to lending that gives us a bottoms-up, forward-looking view at both the borrower and portfolio level, across 273 industries and industry forecast models, with extreme granularity. This enables us to incorporate scenario analysis, historical trends, and peer performance into our monitoring and review process. It also means we can take a risk-based approach to action and continue confidently lending through the cycle without a stop/start approach.
How this provides a better banking experience for you
It can be easy to look back to actual economic data points with the benefit of hindsight and draw the best lending decisions, but this is not always the right indicator of what will happen in the future. Take, for example, that historic trends were not so relevant at the start of Brexit or the Covid-19 pandemic.
When Covid-19 began to emerge in January 2020, our first course of action was to run stress scenarios related to potential supply chain disruption from China on our loan book. By mid-February, before we were even sure that Covid-19 had reached British shores, we had already run six full portfolio stress tests across our entire loan book on a detailed, loan-by-loan basis. We continued to refine the precision of our stress tests – increasing the severity of the situation based on the UK lockdown lasting three months, then six months, then nine months and so on. Credit Intelligence has enabled us to quickly assess any risks and continue confidently lending to both new and existing customers. And as a result, over the course of 2020/21 we completed almost £3bn of new lending.
Using this technology in our business has allowed us to not only increase our funding to ambitious businesses but has also let us keep lending confidently and responsibly. When we combine robust data and analytics with experienced decision-makers, we’re combining our technological know-how and the talent of our people to lend faster, smarter and more.
by Neil Evans, Head of Credit Risk at OakNorth Bank
