EXCLUSIVE: “Growing smarter” – Oxbury Bank in “The Fintech Magazine”
Two-year-old Oxbury Bank is alone among UK agtechs in holding a full banking licence, allowing it to finance digitally savvy and data-rich businesses, based on a unique set of environmental metrics. It’s a lonely furrow, but it looks set to be profitable
By all accounts, being the UK’s first agtech bank doesn’t seem like an auspicious moment. The soaring costs of fertiliser, feed and fuel combined with a messy divorce from the EU that has seen up to £60 billion of produce left to rot this year due to a lack of foreign hands to pick it is hammering farm businesses. But you reap what you sow… and even before its launch on January 29, 2021, Oxbury Bank had been intensively cultivating the technology that would make the lonely furrow highly productive. As it closes its books in just a second full year of trading, signs are that it has already broken even. By 2023, Oxbury is expected to turn a profit.
It’s possibly the fastest route into the black since OakNorth – also a private savings and loan bank – reached its target in a remarkable six months. Both were born out of a frustration with legacy banks’ attitudes to financing growth companies, and both have taken a technology-enabled, people-driven approach to breaking the mold. Oxbury is putting muddy feet on the ground, while the cloud-based, API-ready system is busy winning awards. The most recent was a British Banking Tech Award for Best Use of IT for SME Lending with Oxbury Farm Credit.
“We use the data to assess the farm’s risk. If it is not on the right [sustainable] path, there is a real risk that it will not be able to sell its products.”
Described as a “unique input finance facility”, it is a flexible working capital product that allows farmers and growers to buy essential materials through an approved list of suppliers as they need them and settle when it suits their cash flow. Invoices are automatically uploaded to the bank’s online platform, which is integrated with suppliers, allowing customers to review their account in real time, query and pay bills, repay credit and monitor monthly expenses. While it is key to keeping the tractor wheels turning, it is also important in helping the sector achieve another important goal – achieving net zero.
According to a survey published by NatWest in August, 99 per cent of UK farmers had been hit by input costs above inflation which had forced them to put climate action on hold. At the same time, an overwhelming majority (88 percent) were at least somewhat concerned about the impact of climate change on their industry. It led to NatWest announcing a £1.25 billion lending package for the sector, while increasing support around sustainability.
Virgin Money, meanwhile, has also launched a £200m fund to help farmers decarbonise. In their own study, 72 percent of the businesses surveyed wanted banking products tailored for sustainability; 22 percent said they were asked by customers to provide evidence of carbon emissions. Farmers are right to be concerned, says Oxbury Bank CEO Nick Evans, because how they manage their business today will have a significant impact on their profitability in the future as customer demands, lender attitudes and environmental regulation tighten around environmental impact. As high street banks in the UK struggle to come to grips with interrogating their legacy loan books to face climate-related financial disclosures, Oxbury set out from the start to automatically collect granular data from cloud-based farm management and other apps, feed that information into the core banking system and add the one at the farm post. Once there, it is used not only to improve the bank’s risk assessment process, but also to help customers transition to zero.
While agriculture itself is responsible for 10 per cent of total UK greenhouse gas emissions – mostly nitrous oxide and methane while accounting for only around 1.7 per cent of total CO2 – it is the agricultural landscape’s ability to lock carbon through soil and forest sequestration. which makes agriculture a key warrior in the fight against global warming. According to a 2019 report by the Intergovernmental Panel on Climate Change, global farmland can capture and store the equivalent of up to 8.6 gigatonnes of CO2 a year, and the world released about 9 gigatonnes of it in 2020. Soil carbon is one of several indices that Oxbury Bank collects from its client farms. Among several are biological diversity, climate emissions, energy consumption and pollution.
“We’re in the process of putting together metrics to measure each one,” says Evans. “We use the data to risk-assess the farm to make sure we’re happy with its performance now and we’re going to be happy with it in 15 years, because if it’s not on track there’s a risk it won’t be able to sell their products in the future.
Speaking at the Altfi Green Lending Event in November, where he showcased the Funding Options platform and Tandem bank, Oxbury co-founder and head of customer and regulator Tim Coates said it was important to incentivize its current and future customer base to share data with the bank because ‘better information means lower risk’.
“And this is where fintech, I think, is really involved, because it’s about high-quality data transfer between customer and lender.”
For the forward-thinking CEOs that Evans says the bank has organically attracted, data-driven agriculture is not a foreign concept, and they are willing to trade one valuable commodity for another: information for better access to cash. After all, smart agriculture needs smart cash, and increasingly so as it moves towards Industry 4.0. A record £1.3 billion in agritech deals were signed in the UK in 2021, supporting technologies such as drones and vertical farming systems, which offered solutions for increasing input. costs, food security and the transition to what is sometimes called nature-positive agriculture. Farming is in every way a growth industry, says Evans.
“I thought so in 2018 when we started looking at Oxbury Bank, and I’m even more confident now about the opportunities for farmers and growers.”
Most recently, the bank launched Oxbury New Gen specifically to support start-ups in the agricultural sector whose founders are between the ages of 18 and 40, addressing what has historically been one of the biggest barriers for new entrants to climb – lack of access to cash.
The bank funds successful applicants with up to 100 per cent of their cash flow needs and provides free business and financial support through a national panel of independent advisers. They will be drilled with the mantra “if you can’t measure it, you can’t manage it” and will necessarily become accustomed to collecting and sharing the environmental data on which Oxbury will base its future lending decisions. That way, Evans says, it hopes to ensure that not only are there enough farmers to keep plowing the furrow, but that the furrow will be the greenest on the planet.
This article was published in The Fintech Magazine issue 26, pages 18-19
