India is the world's third-largest Fintech ecosystem after the US and China with market size of $31 Billion in 2021 and one of the fastest-growing concepts in Fintech is Neobanks.
But how are neo banks even functioning considering banks deal with money and we hardly trust entities without any physical existence when it comes to money, right?
Well, we can’t deny the fact that the pandemic definitely spurred the growth of the Neo banking sector. It grew exponentially because social distancing during that time had pushed customers to embrace digital banking services.
Besides, Neo-banks are focusing on providing elevated consumer experience and fast-paced services to their customers to build their trust. To provide the best user experience, neobanks had also tie-ups with the third parties for cross-selling their value-added products. Their features of rapid payment systems, integration of multiple accounts, management of invoices and receivables, and auto-reconciliation of accounts add a lot of value and convenience for their customers – making it a lucrative option.
One such Neobank, we will talk about today is Open - India’s 100th unicorn and Asia's first neo-banking platform for SMEs and Startups.
The startup was founded in 2017 by Deena Jacob and former PayU and Citrus Pay member Anish Achuthan, along with brother Ajeesh Achuthan and his wife Mabel Chacko.
The journey of Open started when they accepted the 15-days challenge from one of India's biggest banks. It was a small team of 8-9 members when they got an offer from a large bank to integrate with it. Integrating the interface, testing, and rolling it out altogether was difficult to complete in such a short duration but the tremendous efforts of the team paid off.
Open aims to democratize banking to SMEs, retailers, homepreneurs, and mompreneurs who don't have access to banking easily.
The very reason why banks do not lend easily to SMEs is due to their low credit score and improper balance sheet. SMEs who account for nearly 30% of India's GDP, employing about 460 million people had to deal with issues of financing. At current, they contribute 40 % of total Indian exports and had maintained a growth rate of 10%. This reflects the importance of SMEs, Open started solving their business problems from raising invoices to reconciling their accounts to tracking their expenses for payroll through their AI-based platform.
Looking at the Neobank space in India,
Niyo, Finin, Jupiter, and Open are some leading Neo-banks in India. But how they are different.
Niyo, which is targeting foreign travelers, charges 0 forex markup fee as they want to eliminate forex cards.
Finin provides cheaper and faster international transactions. It analyses customers' spending and behavior to provide solutions on how to control their expenses. Also, suggest the best investment options. They are targeting customers who want to manage their expenses.
Open, which targets small and medium enterprises, is working on automating business finances.
Parting thoughts - Where is Fintech heading?
In the race of digitizing customer onboarding and enhancing their experience, many companies in various sectors like e-commerce, manufacturers, techs, and telcos are integrating financial products into their eco-systems to retain their customers. This innovation where anyone can be a fintech is regarded as Embedded Financing. As a food delivery platform, Zomato is offering loans to its restaurant partners. Recently Ola has built a first-of-its-kind embedded financing platform to provide financial services to its employees(salary) and customers (paying within the app). While the phrase “Every company is becoming a Fintech company” describes the evolution of the Fintech sector, full-stack fintech companies including neobanks should innovate their offerings timely and unleash their real face to remain competitive in the race.
Content Credits: Sakshi Shukla