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Has the UK lost its fintech crown? Oaknorth's Rishi Khosla talks entrepreneurship and politics
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Oct 7, 2024
Back in the mid-2010s the UK was the centre of the world for fintech. New banks and payment companies were shooting up and global talent was flooding in. But after years of political turmoil, has Britain let its crown slip? City A.M. sits down with Rishi Khosla, the founder of digital bank Oaknorth, to hear how he built a multi-billion dollar fintech firm, whether the UK is still a global hub for the fintech sector, and whether he thinks the Conservative or Labour party are best placed to revive the UK's appeal as a place to do business. Read more of the story here š https://www.cityam.com/oaknorth-london-looking-less-attractive-than-peers-as-listing-destination/ Get more of City A.M. š š http://www.cityam.com X(formerly Twitter): http://twitter.com/CityAM Facebook: http://www.facebook.com/cityam Instagram: http://www.instagram.com/city_am LinkedIn: http://www.linkedin.com/company/cityam Produced by: Joe Lee, Charlie Conchie, Emmanuel Nwosu #Entrepreneurship #Fintech #OakNorth #BusinessSuccess #StartupJourney #UKEntrepreneur #Innovation #BusinessStrategy #DigitalBanking #Interview #RishiKosta #FounderStory #InspiringLeadership #EntrepreneurialMindset #BusinessInsights #labourparty #labour #tories #conservative #conservativeparty #politics #ukpolitics
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0:00
You know, you mentioned there of optimism
0:02
You said the US is perhaps more celebratory of success almost. Do we have, in your view, a problem with tall poppy syndrome
0:09
A hundred percent. Do you think that? I love it. You pressed the button. A good button
0:14
Yes, and it's the media's issue. It's the British media. Is that really true, though
0:19
Do the US celebrate their entrepreneurs in a different way? Yes. Totally. Just think about it
0:24
A US CEO, I don't know, getting paid 20 million or cashing out 50 million in
0:30
stock options. It's something which won't even hit the papers, right? You have the equivalent
0:34
happening in the UK. It's almost like the person's like taken, taken away the public's money
0:39
I'm Charlie Conchie, Chief City Reporter at City AM. And in just a moment, we're going to be
0:43
heading over to Soho to sit down with Rishi Costa, founder of UK Digital Bank, Oak North
0:49
to hear his views on the sector in the UK, what more government can be doing to revive and
0:55
breathe some life back into UK FinTech and get his thoughts in the run-up to a general election
0:59
this year. Let's go and hear what you have to say. Well Rishi, thank you very much for having us back into Oak North HQ
1:12
I wanted to start with a slightly rude question of my kids. Go for it. It's something I've been wanting to ask since the last time we were in here
1:17
Go for it. You work with a treadmill underneath your desk. Why do you do that to yourself
1:24
So you can keep on more walking. You're walking and working, taking calls
1:28
Many people like pacing when they're thinking, right, or talking. Like I have amazing meetings when I go for a walk with someone, right
1:38
Yeah. So over here, being on my treadmill while doing a call, it's just so logical
1:45
Okay. And then if I'm working, if I'm reading a document or something, clearly it becomes harder, right
1:52
So then no. But if you're just processing emails, I mean, absolutely
1:57
I'm glad I've settled that because I've been. intrigued, intrigued looking at it
2:00
You should try it. I will, yeah. I don't know if I'll get away of it. It's a Tiet. I did just want to sort of, before we get into Oak North and sort of talk about you as a
2:10
person, sort of the career, the journey to where you are now, is being here, being sort of running, founding your own business
2:16
Was that always your intention? Since the age of like probably seven, eight
2:22
Why was that? Was that something, you know, it was instilled in you by family? What was it? Yeah. So my, I saw my
2:27
I saw my father go from having a job to building his own business
2:32
and really starting to build his own business at night and on the weekend
2:36
And then ultimately making the flip. And he probably made the flip when I was, I want to say, 8, 9, that type of age
2:45
So I saw him do that. And then I just always had a desire to sort of do something of some significance for me
2:57
building a business was my way of thinking about actually that can lead to some
3:03
significance in terms of positive impact in terms of etc. And you're an entrepreneurial child as well
3:09
You said little businesses. What kind of businesses are you setting up there? I started probably by the age of 11 or 12
3:16
I had two or three small things, right? Buying job lots from somewhere and selling them at school
3:22
Running a small sort of I started computing very early. so I did my GCSE at age of 11 in computing
3:30
So then I started tutoring other kids. At 11, this was. Going into university, at that time you had a student loan scheme, right, which was relatively modest
3:42
I think I forget it was a few thousand pounds a year that you could borrow
3:46
So I borrowed that every year and then put it straight into the stock market
3:51
Thankfully, did incredibly well. So more than triple money. What were you bang on at that sort of time
3:56
It was tech stocks. And very specifically, STM microelectronics. So I'd done a internship at Merrill Lynch when I was 18. And that's where I learn about the business. And then did that every single year through university
4:14
Is Oak North, when you look at it now, does it look like the business you expected it to be when you found it? Does sort of eight and a half years of growth look like what you intended
4:23
The amazing thing is the business has kept if this was the lane which we expected right we kept to that And yes we innovated here and there but the fundamental core mission has stayed exactly the same
4:43
The size and scale of business, if we go back to our original business plan, we are multiples of where we expected to be in terms of size and scale of business, right
4:54
because, again, like our last business was off scale, but a different type of business
5:02
the entrepreneurial journey is always, you get this much success and your expectations go like this, right
5:09
So the divergence between your expectations and actual continue to increase the better you do
5:17
You're now looking, you know, big expansion in the US. Yep. Just reported a bump in profits as well
5:21
Has the last couple of years been more challenging than you expected
5:26
We're obviously in a much higher rate environment now than when you found the business the first six years of running the business
5:32
How have you navigated that? Has it been a lot more challenging than you expected
5:36
What's the actual impact? Do you know what? There hasn't been a smooth period. If you think about it, we launched September 2015, June 2016
5:43
you had the Brexit referendum vote. And since then, the UK has just been like bumpy, right
5:49
And so there hasn't been like, a perfectly tranquil external environment since we've launched the business
5:58
So have the last couple of years been especially challenging? No. They've just been a continued part of the journey and an immense fun
6:05
Just to come back to this sort of US push as well. Is that therefore going to be a much bigger part of the business
6:10
Do you sort of see that being the future of the business in a way now looking towards
6:14
the US? Time will tell. And have the early signs been. You're seeing good take up
6:20
Only signs are being good. And you're in the US as well. You obviously, you founded at North at the time of this big fintech boom
6:25
There was this feeling of sort of optimism, opportunity. Yep. Do you see that in the US and you don't see that in the UK now
6:32
Do you think the mood has changed somewhat in the UK for running a fintech business
6:37
So look, the US is optimistic by nature, right? It's like their optimism runs through the air, right
6:48
the UK isame it's work in progress to get there right sort of like general ambition in the country right
6:56
I would say that when you look at fintech specifically I mean as some people in the US have said to me there's a fintech winter right so it is a it is a challenging period in fintech but you know for good reason we launched lay 15 there are many other companies 16 17 18 but the boom which happened between 18 19 20 21 20
7:18
the amount of capital, the amount of businesses which started and got funded
7:23
which never should have got funded in reality, right? But that type of exuberance, you sort of, you need to let the air out
7:31
and you need to let the people who shouldn't be there fair away
7:37
and there'll be winners who will sort of mop up other players
7:42
And that's just like a good, a good sort of healthy housekeeping exercise in a way
7:47
for the industry. Sort of seeing failures, but failures that should be happening
7:51
and a realistic correction almost. Yeah. Yeah, because you just had overfunding of companies
7:56
which potentially shouldn't have ever been funded. Yeah. And some of them should have been funded
8:01
but they just didn't execute or, etc. On that idea that you mentioned there of optimism
8:07
you said the US is perhaps more celebratory of success almost. Do we have, in your view, a problem with tall poppy syndrome? 100%
8:16
I love it. You pressed a button. A good button. Yes, and it's the media's issue. It's my fault
8:22
It's the British media. The British media. Is that really true, though? Do the US celebrate their entrepreneurs in a different way? Yes. Totally. Just think about it. A US CEO, right? I don't know. Getting paid 20 million or cashing out 50 million in stock options, it's something which won't even hit the papers, right? You have the equivalent happening in the UK. It's like, it's a
8:46
It's almost like the person's like taken, taken away the public's money, right
8:51
So the attitude is so different. When you have that in the US, when you have success in the US
8:58
you have people generally sort of saying, that's amazing, that could be me, right
9:05
Whereas in the UK is this not the same Do you feel attacked sometimes Do you think the press have it in for you I had how can I put it I think the press have been kind right But there have been there absolutely
9:19
have been events. Generally, I would say the media's been incredibly kind with us and supportive
9:26
But if I extrapolate that to wealth creation, entrepreneurial success in the UK, I would say on mass
9:35
they really are not. They're not kind. This plays into this idea of just sort of availability of talent in the UK as well
9:42
Do you as a business have a problem with attracting the right people now
9:46
Is that changed at all? Do you still see the flow of talent that maybe was there in 2015
9:51
So look, this is again a really interesting question and multi-dimensional, right
9:55
I think the UK has always had and continues to have incredible technical talents, right
10:03
So if you're an individual who's like a master of their craft, right, be it engineering
10:09
data science or performing arts, etc., we have incredible talent. The talent which takes those, that sort of those ingredients and creates businesses out of them
10:23
and then scales those businesses, that is where there is an absolute sort of void or vacuum
10:30
Because the UK, until recently, I would say, has had very, very few businesses which have truly scaled
10:38
If you look in the last 10 or 20 years, I mean, how many businesses have been created which have scaled to, you know, whatever, hundreds of millions in revenue
10:50
And I would say that you've had a number now in the recent past, but those don't have a pool of people to go to who've actually
11:00
been there and done it. And because of that, you've got this whole skill shortage in that sort of, you know
11:08
commercial general management, like company scaling in that, in that type of space
11:14
We've seen so many sort of iterations of now global talent visa tech. Yeah. Is that a visa issue
11:19
Have we become too sort of shut on our borders to actually bring in the right people? So I actually think that the efforts made by industry, by the media and government have been amazing in that regard
11:30
in terms of getting those visa schemes up and running. It's really a question on image for the UK, right
11:37
It's like if you are someone who's come out of a scale business
11:42
a business which has gone through scaling, is the UK going to be at the top of your list
11:47
in terms of places where you want to go and move because you think that's where the action is
11:51
The UK has not done the best in its own branding over the last two, three, four years
11:57
Actually, really since the Brexit referendum vote, right? Since then, we became quite insular on the Brexit discussion, right
12:06
And then obviously post-COVID and everything, we just haven't, we haven't come out and sort of created the reputation for the UK as the place where things are happening
12:16
Right. You look at how the economy is done. You look at how sort of just generally you just don't have that upward movement
12:24
So because of that, the UK doesn't generally feature high on people's lists
12:29
And actually in the inverse, you've had a significant amount of very high quality talent decide to actually move out of the UK because they've determined that opportunities are better outside of the UK
12:42
And that's the thing which, you know, for us, we sort of say we need to do something about that, right
12:48
Because we want the UK to be incredibly competitive. We want the UK. The ingredients that we have here are so amazing
12:55
That branding issue, you see that in conversation. That's a branding issue caused by policy
12:59
essentially. It's, I think, caused by the impacts of policy on, you know, just where the country
13:06
is. When you look at London as a whole as a place to run a business, it doesn't sound like you're
13:10
too enamoured with it. And Oat North is one of those companies that always has a question
13:16
hanging over it, does, or if it does intend to float on the public market. I'm glad you said if
13:22
So, I mean, is if a real question at the moment, would you see yourself as a private business
13:26
There's, certainly. Look, I think there's, there's. absolutely no decision there. The public markets aren't incredibly attractive, generally
13:34
right? London is less attractive on a relative basis, right? Today, we have made a clear
13:41
decision one way or the other Yeah I mean you sort of engaged in those conversations around reform at the moment reform in London around the public markets around the private markets Are you seeing anything like positive movement in the right direction
13:55
Do you think any of the regulatory tweaks, the policy tweets that we're kind of going through at the moment
13:59
could actually have a meaningful impact and make it a more hospitable home to someone like Oaknor
14:04
From a public market perspective, I actually think that one of the smartest things being done, right
14:12
So generally, yes, I think that clearly policymakers get this and clearly they've been hard at work thinking through this
14:21
One, if you think about the key challenge is that you don't have a significant number of growth companies on the London Stock Exchange
14:28
And because that you don't have a significant number of growth investors who invest in the London market
14:32
Without the growth investors, you don't have enough depth of potential purchases
14:38
And therefore, as a company, you're sort of letting yourself. be held hostage by a very small group of investors. So the private market initiative
14:48
which the London Stock Exchange is working on, is a very interesting way to sort of say
14:54
OK, as a company, you don't have to go public, but you can actually open up windows where
14:59
you can actually have trading in your stock. So you aren't committing to be public. But
15:04
you're thereby, hopefully expanding the number of investors who are looking at the UK to invest
15:12
and that hopefully starts bringing in some liquidity into the market. Maybe I'm hopeful
15:16
Have you had conversation with the Lundassox exchange about using the private market? Not specifically for Egnorth
15:22
So everything I'm saying right now is just on a generic basis rather than specific to us
15:27
We want to contribute to making the UK a stronger place. Right
15:33
So why do we do the report with the Social Market Foundation? It was exactly for that reason, right
15:37
So it's in the same vein that I'm speaking rather than specifically about Egnor
15:42
the wider conversation we're in an election year most likely you in the past have been a
15:48
Tory donut and now you don't like the pre-fix again the media the media just love that I mean
15:54
when you did donate to the Tory party they couldn't clearly have many years ago just to be clear
15:58
yeah would they have your backing now say do you think they've created a good environment for business
16:03
would you trust them to continue doing it ha ha in previous election cycles the delta between the two
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leading parties has been quite significant, right, in terms of policies and approach
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And if you think back to the Corbyn world, right? It was materially different
16:26
If you look at where things are now, like as someone in business in the UK, it's like the
16:34
delta is really marginal, right? And sometimes you sort of ask which way around are the parties in terms of their policies
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right given that i would say that i'm just much personally i'm less politics matters less
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yeah than it has done in previous elections and you still been engaged you've been speaking
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with the labor party or please what they're putting forward i we've spent time with um with with
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uh the leadership from the labor party and um we think they're they're very pragmatic um they've
17:09
we've had conversations, we've given our inputs into a number of things where we've been asked
17:14
Big picture. Yep. Are you feeling positive about London as a place to be when you look ahead sort of beyond the next year or so
17:22
Do you think it is still going to be the place to grow up business? Even counter to what you said before, I still think London is an amazing place to build a business, right
17:30
It has its challenges, but it is a great place to build a business
17:34
It's the availability of engineering talent and the like has got. easier clearly than it was two or three years ago, right? So I think that London is a good place
17:48
to build. If I look forward 12 months or so, 12, 18, 24 months, I think if there is an election
17:57
depending on obviously who's in power and what changes they potentially make for them to
18:02
continue to recognize the importance of business, for them to continue to the entrepreneurial
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segment, I think is obviously really important. So if we if we stay the course on the direction
18:13
which we're in, irrespect of which party, then then absolutely yes. So feeling sunny for the
18:18
future. There we go. As the sun just came out. Rishy, thank you very much joining us
18:23
Thank you. Enjoy that
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