Internet major Google is increasing its focus on India’s fast-growing yet nascent neo-banking space and has invested in Open, an SME-focused neo-banking platform.
The $100 million funding round was led by Temasek and saw participation from SBI Investment, one of Japan’s leading venture capital firms. Existing investors Tiger Global and 3one4 Capital also participated in the round.
With the latest round, the four-year-old startup’s valuation reached $500 million, as per reports.
Open Financial Technologies, which uses the Open brand to operate in India, said that it would use the funding to strengthen further and accelerate its new product lines – Zwitch, its embedded finance platform and BankingStack, the cloud-native SME banking platform for financial institutions which is currently deployed at over 15 Banks in India.
“Over the last four years, we’ve grown from strength to strength to be the fastest-growing SME neo-banking platform globally. Our product offerings have helped nearly 2 million SMEs in the Indian market, and we’re just getting started. We look to expand our product range in the coming months in embedded finance and enterprise banking,” Anish Achuthan, CEO, Open, said.
Open was founded by serial entrepreneurs Anish Achuthan, Mabel Chacko and Ajeesh Achuthan, along with ex-TaxiforSure CFO Deena Jacob in 2017. The startup had previously raised $35 million and is backed by Speedinvest, Beenext, Recruit Strategic Partners, AngelList, Unicorn India Ventures and Tanglin Venture Partner Advisors.
Open will expand its base to 5 million SMEs and expand to global markets like South East Asia, Europe and the US over the next year. Open’s neo-banking platform integrates all the tools used by small businesses and combines them with a business current account.
Today, the Open platform powers close to 2 million SMEs and processes over $20 billion in annualized transactions. The platform also adds over 90,000 SMEs every month, making it the fastest-growing SME-focused neo-banking platform globally.
Techcrunch reported that Open is working on another funding round that is expected to see investors such as Visa.
Neo-banks are typically digital entities and operate online to offer financial services in a transactional platform for merchants, a lending service provider or an account manager.
In India, neo-banks don’t follow any standard regulatory code. They don’t take bank licenses of their own to operate instead of relying on already accredited banking partners for licensed services. India’s banking regulator, the Reserve Bank of India (RBI), has not permitted a 100% digital bank model in India yet.
There are around ten neo-banks in India, with Open, Jupiter, RazorpayX and Niyo being prominent. Global neo-bank Revoult is also planning to enter the Indian market.
While the Indian neo-bank market is still in the nascent stages, the global market was worth $18.6 billion in 2018 and is expected to accelerate at a compounded annual growth rate (CAGR) of around 46.5% between 2019 and 2026, generating approximately $394.6 billion by 2026.
“The team at Open have combined deep domain expertise and product-focused rigour to deploy a full-stack solution that places SMEs at the centre of a universe of innovation. This platform has set the standard for business banking and will take this full-stack approach into new adjacencies and geographies. We are excited to continue our partnership as Open scales into a global fintech innovation engine,” Pranav Pai, Founding Partner and CIO of 3one4 Capital, said in a joint statement.
Amazon is also taking a particular interest in India’s fintech market. It recently made a foray into the country’s wealth management market with its maiden investment in startup smallcase Technologies. The investment was made through its $250-million early-stage tech fund Amazon SMBhav Venture Fund (ASVF), launched in April this year.
The e-commerce giant backed the Bangalore-based startup in a $40 million Series financing round led by Faering Capital.
Related article: Google partners with Indian banks for loan services