Report: OakNorth and N26 Have Received the Most Funding Out of All US and European Digital Banks

Digital-only banks, or neo-banks, are not dependent on outdated, legacy financial infrastructure. These virtual banks are more efficient than traditional banking institutions because they operate without the costly networks of physical branches.

Neobanks have been working towards transforming the retail banking sector in major financial markets throughout the world.

According to Crunchbase data, OakNorth ($1 billion) and N26 ($670 million) have received the most funding out of all other major US and European neobanks.

Other top European and American digital banks include Atom bank, Revolut, Monzo, Chime, Starling Bank, Varo Money, and Aspiration. These digital-only financial services providers have benefited from an innovation-friendly regulatory environment and have picked up significant momentum in Europe during the past three years.

Several European digital banks are already entering the US market leveraging the experience generated by operating in continental Europe and the UK.

Although many of the relatively older digital banks are based in the US, which includes Simple (launched in 2009) and Moven (established in 2011), the American digital bank ecosystem has not made as many advancements as Europe’s digital-only banks. This is largely due to a convoluted regulatory regime.

In the UK, one of the most robust Fintech markets, regulations are relatively streamlined. Digital banks have been encouraged to compete with traditional brick and mortar banks.

The US, by comparison, possesses a stultifying regulatory approach that makes it exceptionally difficult to receive a federal bank charter. Few digital banks possess a federal banking charter. Lobbying by traditional financial services firms have also slowed the development of digital banks.

Agile Fintechs have learned to adapt and today most US-based digital banks partner with a chartered bank to provide bank-like services.

Consumers, particularly the younger generation, have become increasingly frustrated with traditional banking services providers. Millennials are also more eager, or inclined, to consider using digital solutions, which may lead to more people using digital banks in the future.

There are many reports that have been prepared (including Business Insider’s Evolution of the US Neobank market) to address questions related to how digital banks and other modern Fintech firms are planning to establish their operations in the world’s financial markets.

Fintech: UK’s OakNorth Bank Appoints Former Google Executive Sunil Chandra As CEO of Its New Credit Platform

OakNorth, a UK-based digital bank that provides business and property loans to small and medium-sized businesses, announced on October 7 the appointment of Sunil Chandra as CEO of its new credit platform.

Chandra, a former VP at Google Inc, helped scale the internet company’s talent and extended its global operations from around 7,000 employees in 2007 to currently more than 100,000. Prior to his senior management role at Google, Chandra was the chief operating officer (technology) for Barclay Capital for more than two years. 

Chandra also worked for seven years as director of administration at McKinsey & Co. for the Southeast Asia and Greater China region.

A global senior management professional, Chandra has been responsible for scaling business operations and recently relocated from San Francisco to London in order to join OakNorth.

The OakNorth platform helps financial and lending institutions throughout the world to serve the lower mid-market business segment (for loans between $1 million – $25 million) in a more holistic manner. 

The platform has helped OakNorth Bank become one of the most profitable new financial institutions in the UK. The Fintech has issued more than $5 billion in loans in the past four years. 

Sunil will be leading the Oak North’s business expansion in the US, Europe, and Asia. He will be responsible for ensuring that the company’s business meets its commercial and strategic goals.

Co-founder of OakNorth Rishi Khosla stated:

“The last decade has seen the growth of tremendous technology companies like Google, and Sunil was instrumental to that growth and indeed the broader industry. Joel and I are incredibly excited to have him join us, as we scale to meet the strong interest our platform has garnered with clients globally.” 

Khosla added:

“His strong management experience and track record in scaling one of the world’s largest tech companies will help shape OakNorth’s future evolution and expansion with partner banks around the world.”

Meanwhile, Sunil Chandra noted:

“It’s an incredible privilege to be joining the team at OakNorth. In a short period of time, the business has identified a key segment of the market that is underserved, proven that thesis with the profitable OakNorth Bank in the UK, and is now scaling the solution globally by licensing its platform to other lending institutions.” 

Chandra also mentioned:

“SMEs account for roughly half of the GDP of the world. By supporting their growth, we are not only helping them, but also their local communities who will benefit from new jobs and additional GDP. After more than 12 years at Google, I am excited about this next challenge and look forward to building the business into what will no doubt be one of the world’s premier tech companies born out of Europe.”  

UK Fintech OakNorth Secures $440 Million Through Latest Investment Round Led By Japan’s SoftBank

OakNorth, a UK-based fintech startup, has successfully secured $440 million through its latest investment round, which was led by Japan’s SoftBank Group Corp. 

Launched in 2015 by Rich Khosla and Joel Perlman, OakNorth claims to be Europe’s fastest-growing fintech company by assets and valuation. The company explained that it provides fast, flexible, and accessible debt finance to established British businesses. Its clients include nurseries, hotels, care homes, private equity firms, bars, restaurants, tech companies, security businesses, property developers/investors, and professional services companies. In addition to business lending, OakNorth also offers a range of FSCS-protected savings accounts for individuals and businesses.

“OakNorth was created to help the UK’s growth businesses and entrepreneurs reach their potential by providing them with bespoke, no-nonsense debt finance solutions.”

According to Reuters, Khosla stated that the company is planning to use the funds to expand its services in the U.S. before considering further overseas opportunities.  Khosla also explained:

“Small businesses are the key growth driver in most economies and that’s true in the UK. The fundamentals are absolutely good over a period of time. If you tar a whole segment with the same brush I think that’s incredibly unfair. You’ll always have good businesses and bad businesses.”

Softbank’s Vision Fund notably led the round with a $390 million investment. The round brings OakNorth’s valuation to round $2.8 billion. Khosla added:

“SoftBank always has a very large vision for businesses they get involved in and for us we have a relentless focus on small businesses. For us to fulfill that on a global basis having an investor who shares that vision is really important.”

Mambu: A Truly Global SaaS Banking Platform for Traditional Finance & Fintechs

Mambu is a Software as a Service (SaaS) platform that has quickly differentiated its product as a leader in the white label core banking space. The cloud based service provides a path for both traditional finance and Fintech’s to rapidly launch a digitally native financial services platform without diving into the hassle of a custom, in house solution in the highly regulated finance industry.

Today, Mambu is operating in 45 different countries indicating its ability to quickly adapt to diverse regulatory regimes. Launched in 2009, Mambu saw an opportunity to fill the vast void that legacy technology was simply unable to accomplish given the rise of alternative finance.

Mambu is a Fintech rockstar that started small but is quickly becoming bigger. Co-founded by CEO Eugene Danilkis and COO Frederik Pfisterer, and Sofia Nunes, Head of Talent & Culture, Mambu is a Berlin based Fintech, a standout in the emerging Fintech scene. Danilkis started his career developing NASA-certified software for the International Space Station. Today, he leads an international team which is helping banking and Fintech companies adapt to the future of finance.

Crowdfund Insider recently connected with Danilkis for an update on platform progress. Our discussion is below.

Can you please provide an update on Mambu and global utilization? How many different companies are using your digital banking services? Which countries are you operating in?

Eugene Danilkis: Mambu is growing fast, both in terms of volume of clients and the diversity of our client base. We have more than 180 live operations in over 45 countries, our solution powers over 5000 loan and deposit products which serve over 4 million end customers.  Those products include business financing, consumer lending, marketplace lending, current accounts, transactional accounts and savings accounts.

Mambu is live on 6 continents, countries of operation include the UK, Netherlands, Germany, Sweden, the US, Kenya, Australia, Philippines, China and Argentina, to name a few.  Our clients range from FinTech revolutionaries to traditional banks.  Some examples include:

  • Oaknorth, the bank built by entrepreneurs for entrepreneurs, which provides business loan and deposit products for UK SMEs.  It is the the first fully regulated European cloud-based bank, has a loan book of over £600m and has just achieved unicorn status having been valued at over 1 billion US dollars.
  • N26, Europe’s first mobile-only retail bank has more than 500,000 customers in 17 countries.  It is one of the fastest growing mobile banks in the world and is headquartered in Berlin, Germany.
  • New10, ABN AMRO’s newly launched SME lending Fintech, went from concept to launch in 10 months and is offering a fast and fully digital loan application process for Dutch businesses.
  • Globe Telecom’s lending business Fuse, offers consumer and business lending products in the Philippines.  By diversifying into financial services, leading Filipino telco Globe is able to offer more products to its 60 million customers.
  • PayU Colombia is using Mambu to power its new short term deferred payment product.  The product is currently being piloted in Colombia, with the potential for a wide scale roll out across Latin America.

Is online lending, including P2P, marketplace and balance sheet lending, the most demanded service right now?

Eugene Danilkis: Across all lending verticals, consumer, business and marketplace, there is significant demand for digital and customer centric loan products.  New technology, like Mambu, has enabled providers to meet this need which would historically have been unviable due to the constraints of legacy systems.  The products they are now able to provide are better tailored to consumer demands, regulatory requirements and market needs.  Consumers and businesses seeking credit are benefitting from more choice and better products as a result of this shift.

That being said, we have experienced a rise in demand from institutions looking to launch new digital banking services, offering both deposit and loan products.  A range of providers, from traditional banks to innovative startups are seeking to leverage the speed to market and agility of technology like Mambu to launch new products, expand into new markets, start new ventures and transform existing operations.

We’ve also seen a growth in institutions looking to explore a different approach and take a marketplace model similar to that of N26.  They want to collaborate with product providers to offer clients a wider range of products and services.

Where do you see the most opportunity for growth going forward the next 12 to 24 months?

Eugene Danilkis: We are seeing a growing trend of established financial institutions looking to launch their own FinTech or digital bank.  It’s a concept we refer to as ‘launching speedboats from cruise ships’.  These spin offs combine the best of two worlds, the resources and experience of an incumbent with the technology and culture of a FinTech.  By operating independently these spin offs are able deliver significant results in a short period of time, free of the legacy technology and thinking which often anchors their parent organisations.

An example of this is New10, ABN AMRO’s newly launched Fintech, which provides fast and fully digital loan loans to Dutch SMEs.  New10 went from concept to launch in 10 months with the Mambu implementation taking just four months.  Operating independently, New10 is unencumbered by traditional processes and systems, which allows them to move quickly, innovate while still being able to access the extensive experience available within the bank.

We have a number of other similar initiatives in our pipeline and we expect to this demand continuing to increase in the next 12 to 24 months.

[clickToTweet tweet=”New10 went from concept to launch in 10 months with the Mambu implementation taking just four months #Fintech” quote=”New10 went from concept to launch in 10 months with the Mambu implementation taking just four months #Fintech”]

There appears to be more traditional lenders (IE banks) more inclined to go it alone and launch their own platforms. Goldman Sachs launched Marcus which they developed in house. Is this a trend? Or an opportunity for Mambu?

Eugene Danilkis: As mentioned above, this is a trend that is gathering momentum and it is an opportunity for Mambu. This approach allows banks to attract new customers whilst simultaneously enhancing their product offering for their existing customer base.  Additionally, banks launching spinoffs can apply new technology and operational models to new markets by leveraging the best available technology.  They can then take these learnings and apply it back to the larger bank.

As a result of this approach, we see demand growing for SaaS engines like Mambu.  Incumbent institutions are taking inspiration from Fintechs like N26.  The business model adopted by N26 has delivered, their customer base has grown by over 500% in a year and they now operate in 17 countries.  Incumbents seeking to emulate this lean and agile approach are seeking out technology with the same attributes to drive their spin off initiatives.

What about other types of securities? Have you considered the ICO market? What about cryptocurrencies? Are you facilitating BTC, ETH etc?

Eugene Danilkis: One of our clients, a US-based lender, provides these services and utilises Mambu to allow holders of blockchain assets to leverage their holdings as collateral for cash loans.  It is the first asset-backed lending platform to give blockchain asset holders access to liquidity without having to sell their tokens, basically traditional lending secured by non-traditional collateral.  It is broadening blockchain technology’s reach by acknowledging financial wealth which is not readily accepted by traditional lenders.

And what about Blockchain? It seems like every bank in the world is moving to leverage Distributed Ledger Technology. Where is Mambu in this regards?

Eugene Danilkis: We strongly believe in providing functionality and technology that brings fundamental value to our clients. At this point in time, we see blockchain adding value only when it is distributed, i.e. the ledger is shared across multiple entities, which can validate the transaction before it ends-up in the blockchain itself. In context of where Mambu operates, which is servicing a single entity, such capability wouldn’t add any significant value to our clients in and of itself, hence we are watching this closely, but not planning to introduce it in a near term.

We do expect more of our clients to use blockchain technology in combination with cryptocurrencies and smart contracts while partnering with other third parties, and we can readily support these uses cases and their easy integration with Mambu.

[clickToTweet tweet=”We do expect more of our clients to use #blockchain tech in combination with cryptocurrencies and smart contracts ” quote=”We do expect more of our clients to use #blockchain tech in combination with cryptocurrencies and smart contracts “]

What about the regulatory side of things? Are you encountering significant hurdles in any region? Your platform is compliant in all markets – correct?

Eugene Danilkis: We are seeing more regulators encouraging SaaS implementations, even in highly regulated markets like the UK, US and Germany.  Regulators have taken a consultative approach and are working with different lenders and reviewing environments in order to understand it better.  They see the benefit of SaaS and in an effort to increase competition and bring more consumers into the financial sector, are allowing more new entrants to be cloud-based.

We have the right internal controls and work with preferred suppliers like AWS on the data side to ensure we are compliant.  Mambu’s APIs allow a lot of flexibility in automating regulatory compliance directives, setting up alerts for certain events or automating previously manually processes like reporting.

You have an office in the US – how is reception of Mambu SaaS in the states?

Eugene Danilkis: We are fairly new to the US but reception has been good so far.  There is an increasing demand for SaaS platforms and we are talking to a broad range of providers, from new banking and lending entrants keen to do something different, together with traditional top tier institutions looking to launch new products or expand their product offering.  Our offices in Miami support the US and Canadian market as well as our growing customer base in Central and Latin America.

Cybersecurity has been a hot topic of late with the recent intrusions including the US SEC. What is Mambu doing to guard against attacks and hacks?

Eugene Danilkis:  We operate in a highly sensitive and regulated environment (i.e. financial services) and this requires us to consider security as a critical aspect of our operations. Security is embedded in every area of the organisation, starting with physical access and ensuring security of the workplace and devices, and further in every step of application lifecycle management. We employ industry best practices to ensure security is part of our development lifecycle from the definition of requirement, to peer reviews, to continuous automated security testing and vulnerabilities scanning. In addition, we partner with multiple third party organisations and recognised security experts to perform periodic testing of our platform and the corresponding infrastructure.