Oaknorth has received regulatory approval to open a representative office in New York, paving the way for the London-based challenger bank to expand further into the US market ahead of a potential stock market listing.
The authorisation from the Federal Reserve and the New York State Department of Financial Services will allow Oaknorth to proactively market its products and services from its US office, the bank said on Tuesday.
Oaknorth added that it continued to explore the possibility of acquiring a US banking charter.
The digital bank said earlier this year that it was “actively exploring M&A opportunities” within US banking and fintech, as well as offering its software to banks in the country.
The business-focused lender, which launched in 2015, entered the US in the second half of last year and has lent around $600m (£454m) in the market since then.
It focuses on serving “scale-up” businesses with turnover between $1m (£757,000) and $100m (£75.7m). Oaknorth said these firms make up around a quarter of all SME turnover in the US despite representing just 3.4 per cent of all SMEs.
Oaknorth added that while the US has some 4,700 banks, the majority do not have the resources to cater to “the sophisticated requirements” of these “lower mid-market” businesses.
The bank noted a “growing void” in the sector following the collapse of several US commercial banks over the last 18 months. Oaknorth itself put in a bid to acquire the UK arm of Silicon Valley Bank when its US parent collapsed last March, ultimately losing out to HSBC.
“Without doing any marketing, we’ve done about three times more business in the US over the last year than we thought we would have done by this point,” said Rishi Khosla, Oaknorth’s co-founder and chief executive.
“This is a clear demonstration of the demand from the lower mid-market for a banking partner like Oaknorth, which can provide the speed, flexibility, transparency and entrepreneurial approach these businesses need to succeed and scale.”
He added that the new authorisation would allow Oaknorth to “continue supporting businesses that are vital to the economy but are being underserved and overlooked by commercial banks”.
The news comes as Oaknorth, one of a crop of fintech “unicorns” to emerge in the 2010s, weighs up entering the public markets.
Khosla told City A.M. in May that no decision had been taken on when and where to IPO and said the public markets were “not attractive right now”. However, he added that the UK was “less attractive on a relative basis” than other markets.