Google-backed Open plans to onboard 10 mn small businesses in three year

Open, the Google and Tiger Global-backed neobank, is planning to onboard about 10 million small businesses in 3 years as it aims to solve a series of challenges faced by SMEs for managing their business finances, using technology. 

Open offers a business account in partnership with banks that help SMEs automate and run their finances effectively. The firm which work with the top 14 banks in India is aiming to onboard about 250 banks globally which would be using its platform and technology. It plans to scale up its operations globally in markets such as Europe, Southeast Asia and the Middle East.

“We started Open five years back primarily to solve the challenges small businesses face when it comes to business banking because there are a lot of inefficiencies in the existing processes,” said Anish Achuthan, co-founder and chief executive officer of Open, in an interview. “Today many top banks in the country are deploying our solution to launch their own neobanks.”

For instance, the firm’s BankingStack solution empowers banks and financial institutions to launch digital banking services. It is deployed at over 15 banks in India and 2 banks in South-East Asia. This is empowering banks to complement their own digital banking offerings and offer a superior experience to their customers.

“We are enabling traditional banks to bring better banking experiences to their customers,” said Achuthan.

Open competes with players such as Razorpay and British fintech firms like Revolut and Tide.

Open recently became India’s 100th unicorn after it raised 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 onboards 100,000 new SMEs and startups every month.

The platform enables businesses to collect payments, make seamless payouts, and streamline expense management. The other processes include managing compliance, auto-reconcile and categorising income and expense, thereby automating book-keeping.

“Currently we manage deposits worth $2 billion on our platform. We aim to take this to about $7 billion by next year,” said Achuthan.

Open, was founded in 2017 by fintech serial entrepreneurs Anish Achuthan and Mabel Chacko, alongside Ajeesh Achuthan and Deena Jacob in 2017.

As a natural progression, Open is now tapping the SME lending space as well. The platform is gearing up for the launch of three new products aimed at enhancing the capital needs of SMEs apart from its existing SME credit card offerings. The new products include Open Flo – a revenue-based financing product for e-commerce businesses, Open Settl – early settlement credit offering and Open Capital – working capital lending offering for SMEs.

Open is targeting to disburse $1 billion in lending 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 would cater to 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 integration with accounting, finance and payroll in a seamless way.

Achuthan said that  SME lending is the need of the hour as small businesses have been largely lacking access to robust capital resources.  A recent IFC report indicated that SMEs take up a minuscule 6-7 per cent credit share and face a credit gap of close to $1.1 trillion.

The firm recently received a go-ahead from the Reserve Bank of India (RBI) for its new cross-border payments product. This comes after Open completed the test phase of the second cohort under the RBI’s regulatory sandbox structure themed ‘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’ a  no-code embedded finance platform. This enables businesses from any industry to build personalized financial products and services that fit into the customer journey.