Startup Circle: How is Open disrupting banking and financial automation space for SMEs and startups?

In India, the neo banks segment is rising as with a $90 million funding last year. Currently, there are 10 neo banks in India while some more are expected to start their operations soon. Open is one of them.

The sector has great potential as it has more flexibility than conventional banking. It is advanced, digitally savvy and convenient. As these banks are fully digital, their main focus is based on the key areas of their partnership with the banks. With the advent of Neo banks, SMEs and Startups have disrupted the financial automation space. Read the story of the neo banking startup, Open, from Mabel Chacko, Co-founder & COO.

What is Open about? Tell us about the team.

Open is Asia’s first SME neobanking platform in Asia that combines everything from banking to payments and accounting in one unified service. Open’s automated business banking platform saves hours for business owners and finance teams, thus allowing them to focus on their core business.

Four co-founding members make up the leadership team at Open. Anish Achuthan and I have jointly founded 3 fintech startups before Open. These include Cashnxt (branchless banking), Neartivity Wireless (NFC Payments) and Zwitch (Developer payment gateway). Ajeesh Achuthan was co-founder & CTO of Zwitch where we developed a tokenization based payment processing mechanism for a seamless payment checkout experience to end-users. Deena Jacob was heading finance @ TaxiforSure. Since inception, we have grown the Open team. Today, we have a head-count of 250 people spread across 5 cities.

How did you come up with the idea?

We have been working in the fintech and payments space for over 15years now. Open is my fourth fintech startup. My previous startup was Zwitch- a developer focussed payment gateway which was used by over 3000 startups. Zwitch was later acquired by CitrusPay. Post the acquisition, I was heading marketing for CitrusPay and later PayU India. I got to interact with many small businesses and startup entrepreneurs and I realized that like me, almost all small businesses struggle to manage their finances. They had different tools and accounts for different processes, which took up a lot of their time.

Alongside, my other co-founders Anish and Ajeesh, we thought about making a bank account an effective tool for SMEs to automate the process of managing their finances. We collectively discussed the idea with Deena Jacob (she was a client for us in Zwitch), who instantly bought into the concept and the vision. And in May 2017 we started Open.

How are you transforming the banking sector?

Traditional banking services have always been restricted in terms of pricing (hidden charges), availability (complex process for customer support/service requests), and not a very friendly user-interface. Open wanted to change the way banking is offered and perceived. We also noticed gaps in B2B banking for SMEs that were offered by traditional banks. Hence we wanted to bridge this gap, by trying to solve the challenges faced by SMEs in managing their business finance. We are transforming banking as for the first time we are offering a business banking service that helps SMEs automate and run their finances effectively.

SMEs face a lot of difficulties tracking and forecasting cash-flows, effectively managing account receivables & payables. They need to deal with multiple interfaces for accounting, payment gateway and payroll and there is a lack of online tools that help them plan their day to day activities. Open’s services come pre-integrated with payment gateway, current account, automated accounting, and APIs that can help integrate banking into business workflows. Using Open, SME business owners can save at least 2-4 hours of a day where they do not need to track payments using UTR numbers.

What is your business/market growth?

We’ve onboarded over 700,000 SMEs since our inception and are processing over $ 15 billion in annualized transactions. We onboard 50,000 SMEs every month. Recently, we launched the Founder One Card. It is a corporate business card for SMEs and startups. We have issued over 30,000 cards in the past 4 months.

The pandemic has affected every sector. How are you coping?

Luckily we’re in a segment in fintech that didn’t see too much impact. We saw a lot of otherwise traditional/offline businesses going online. This includes freelancers, home entrepreneurs, private tutors and many more. At the start of the year, we had over 400,000 SMEs on board, today we stand at 700,000 SMEs using the platform. Our transaction volumes have also surged to over $15 billion in annual transactions.

What are your Post-Covid plans?

We want to be the go-to platform for businesses when it comes to digital banking in partnership with banks. Our vision is to bring 15 lakh SMEs on the platform in one year by September 2021. Our focus will be on helping them with banking and payments whilst also tackling their working capital requirements. We have a lot of data available from these SMEs such as tax payment, the frequency with which they pay out vendors, etc. That’s why we are partnering with NBFCs. Due to the liquidity crisis, banks and NBFC are cautious to lend to SMEs. The balance sheet information has been helpful for them to provide tailored access to credit.

Secondly, businesses don’t earn any interest on current accounts in India. Also, most of the banks do not have the expertise to do treasury management of a liquid fund or a mutual fund.

Thirdly, there are a lot of external platforms that want access to smaller businesses like FMCG providers. They are keen to bring their services onto our marketplace so that they can get access to SMEs. Maybe a cash n carry FMCG can use this data to provide lending and other services.

Funding

Total funding so far – $35 million (Series A & Series B); Key investors – Tiger Global, Speedinvest, 3one4 Capital, Unicorn India Ventures, Recruit, Amrish Rau & Jitendra Gupta (former PayU India)