Open, the neobank backed by Google and Tiger Global, is planning to onboard around 10 million small businesses in 3 years as it aims to solve a number of challenges faced by SMEs in managing their business finances, using the technology.
Open offers a business account in partnership with banks that help SMEs automate and manage their finances effectively. The firm, which works with the top 14 banks in India, aims to include around 250 banks worldwide, which will use its platform and technology. It plans to expand its operations globally in markets such as Europe, Southeast Asia and the Middle East.
“We started Open five years ago primarily to solve the challenges small businesses face when it comes to business banking, because there are so many inefficiencies in existing processes,” said Anish Achuthan, co-founder and chief executive of Open, in a interview. “Today, many leading banks in the country are using our solution to launch their new banks.”
For example, the firm’s BankingStack solution empowers banks and financial institutions to launch digital banking services. It is deployed in over 15 banks in India and 2 banks in Southeast Asia. This is empowering banks to complement their digital banking offerings and deliver a superior experience to their customers.
“We are enabling traditional banks to bring better banking experiences to their customers,” Achuthan said.
Open competes with players such as Razorpay and British fintech firms such as Revolut and Tide.
Open recently became India’s 100th unicorn after raising a $100 million round led by Temasek, Google and SBI Investments. It is now serving more than 2.3 million SMEs and processing $30 billion in transactions annually. The platform includes 100,000 new SMEs and startups every month.
The platform enables businesses to collect payments, make seamless payments and simplify expense management. Other processes include compliance management, automatic reconciliation and categorization of income and expenses, thereby automating bookkeeping.
“We currently manage $2 billion worth of deposits on our platform. We aim to take this to about $7 billion by next year,” said Achuthan.
Open, was founded in 2017 by serial fintech entrepreneurs Anish Achuthan and Mabel Chacko, along with Ajeesh Achuthan and Deena Jacob in 2017.
As a natural progression, Open is now also tapping into the SME lending space. The platform is preparing to launch three new products aimed at increasing the capital needs of SMEs, in addition to its existing SME credit card offerings. New products include Open Flo – an income-based financing product for e-commerce businesses, Open Settl – an early repayment loan offering and Open Capital – a working capital lending offering for SMEs.
Open aims to disburse $1 billion in loans through the new suite of products on the platform in the next 12 months.
For this Open and IIFL Finance Ltd. have come up with a joint venture to launch a neo-bank that will cater to the banking and credit requirements of micro and small enterprises (MSMEs). It will offer an alternative experience to traditional banking. This includes providing a simple interface for banking and integrating with accounting, finance and payroll in a seamless manner.
Achuthan said SME lending is the need of the hour as small businesses largely lack access to robust sources of capital. A recent IFC report showed that SMEs receive a small share of credit at 6-7 percent and face a credit gap of nearly $1.1 trillion.
The firm recently received an approval from the Reserve Bank of India (RBI) for its new cross-border payments product. This comes after Open completed the second batch testing phase under RBI’s sandbox regulatory framework on ‘Cross-Border Payments’. Open is one of the 4 entities that have completed the testing phase of RBI’s regulatory sandbox.
Open has also come up with ‘Zwitch’ an integrated no-code financial platform. This enables businesses from any industry to build personalized financial products and services that fit the customer journey.