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Commercial Lenders Will Emerge from COVID-19 in a New Light by Embracing Digital Transformation

By Rishi Khosla, Co-Founder and Group CEO at OakNorth

Financial Services-1.1The world is currently facing a critical period of uncertainty it hasn’t seen in more than a century, and one that will have a profound impact for generations to come.

The United States Treasury and Federal Reserve’s response to COVID-19 has been unprecedented. Yet, despite their timely response, the effects of the pandemic have already started to unfold.

Small and medium-sized businesses (SMBs) have been particularly hard-hit, with 51 percent saying they can only survive for another 0-3 months.

The American Bankers Association recently noted the Paycheck Protection Program (PPP) has been a “financial lifeline” to small businesses nationwide, but many were still awaiting assistance when the initial round of funding ran out April 16. Fortunately, five days later on April 21, Congress approved a further $310 billion to extend the program.

With PPP extended and the Main Street Lending Program (MSLP) expected to launch in May, the focus now needs to be on ensuring banks are ready to support Main Street. Lenders and policy makers must be ready to mobilize teams and resources, and implement new processes and partnerships faster than they’ve had to before.

By embracing data and technology to transform legacy IT and internal processes, commercial lenders will be able to effectively and quickly provide funding to the SMBs that need it the most.

OakNorth, an AWS Partner Network (APN) Select Technology Partner with the AWS Financial Services Competency, is committed to supporting lenders participating in these programs, as well as the businesses relying on loans from them.

OakNorth is a next-generation credit analysis and monitoring platform powered by Amazon Web Services (AWS). The OakNorth Platform uses several AWS services, including Amazon Simple Storage Service (Amazon S3) for secure durable storage, allowing transparency for the customer and a lasting audit trail of how their stack is being used.

OakNorth also leverages Amazon Elastic Compute Cloud (Amazon EC2) and managed services such as Amazon Elastic Kubernetes Service (Amazon EKS) and Amazon Relational Database Service (Amazon RDS), which allow it to stand up services rapidly and scale to meet high levels of demand while maintaining availability and security.

The OakNorth Platform also uses AWS Key Management Service (KMS) and encryption in transit and at rest to ensure it meets the highest regulatory standards around information security, while at the same time putting customers in charge of access to their data.

With AWS, the OakNorth Platform provides banks and lending institutions with the insight and foresight they need to more effectively lend to the “Missing Middle,” or the growth businesses which are the backbones of communities and economies globally.

The OakNorth Platform has enabled its sister business, OakNorth Bank, the first UK bank to be fully cloud-hosted, to become the fastest growing business in Europe according to the Financial Times, and to rank amongst the top one percent of banks globally.

Using Credit Science to Identify Vulnerable Businesses

In January 2020, when COVID-19 began to emerge, the first step OakNorth Bank took was to look at the potential for international supply chain disruption. When news began circulating of a potential lockdown in the UK, the team ran reverse stress-tests based on 34 sector-specific COVID-19 stress scenarios.

They reviewed the entire loan book and came up with a “COVID vulnerability rating” (CVR) framework, which looks at what the impact could be to businesses if there was a six-week lockdown, followed by reviews of three and six-month lockdowns.

Now, the framework is even running stress-tests on what the impact could be if there is a nine-month lockdown for certain industries.

The OakNorth Bank team used the CVR framework to determine which of their business clients needed immediate support.

With a strong framework developed, tried and tested within OakNorth Bank, we turned our attention to supporting lending partners around the world so they could do the same. In the last three months, the OakNorth Platform has analyzed c.$30bn of loans using the CVR framework.

OakNorth is also enabling lending partners to identify which businesses in their portfolio should be prioritized for government-backed funding such as the PPP and MSLP.

The Treasury and Federal Reserve’s Support for Businesses

Both the PPP and MSLP present unique opportunities for lenders to support and build trust within the business community.

At OakNorth, we were able to extend the monitoring capabilities of our core platform to develop an end-to-end PPP product, from application and document collection to pre-screening and forgiveness.

The PPP product ensures participating banks retain complete control of key decision-making and risk-management processes, including loan eligibility, authentication criteria and checks, compliance review, the credit decision, and the forgiveness eligibility and approval.

Customers Bank is a fintech-forward super-community bank headquartered in Phoenixville, Pennsylvania. As the first round of PPP was winding down, Customers Bank recognized it needed a strong technology partner to increase its bandwidth for responding to the economic crisis with a robust platform.

Sam Sidhu, Chief Operating Officer at Customers Bank, noted in a statement that OakNorth, which runs on AWS, was able to get the solution up and running within 72 hours from our first conversation. This contributed to round one success of more than 1,200 loans funded for $384 million. The partnership continues through round two, and has already resulted in funding hundreds of additional PPP loans.

While PPP was operationally intensive, the MSLP will require significantly more credit and customer-specific analysis. Banks will therefore have to find a way to rapidly design new processes to reduce their loan processing times from the typical 8-10 weeks to 1-2 weeks without jeopardizing credit quality.

OakNorth has designed an MSLP product that provides participating lenders with rapid segmentation of their entire loan portfolio. It indicates which borrowers need to be prioritized based on their CVR, and the extent of debt required to help the borrower survive this crisis and reboot post-lockdown.

The segmentation allowed by OakNorth enables banks’ relationship managers to formulate the borrower financing strategy, including which borrower should be funded through MSLP, and which borrowers should be funded through the bank’s balance sheet.


Small businesses need support from bankers that understand their business, now more than ever. Lenders, overwhelmed with demand, need help cutting through all of the noise to focus on the most at-risk parts of their portfolio and prioritize engaging those customers.

Together, banks, credit unions, and fintechs such as OakNorth can deploy capital more effectively and save the jobs and small and medium-sized businesses that power our economies.

If you wish to speak to us about out our PPP and Main Street products, visit the OakNorth website to learn more.

The content and opinions in this blog are those of the third party author and AWS is not responsible for the content or accuracy of this post.


OakNorth – APN Partner Spotlight

OakNorth is an AWS Financial Services Competency Partner. OakNorth is a next-generation credit analysis and monitoring platform powered by AWS that meets the highest regulatory standards around information security, while at the same time putting customers in charge of access to their data.

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