[The Turning Point] Here’s why fintech startup Open built a neobank for SMEs

To opena neo-banking platform focused on small and medium-sized enterprises (SMEs), became the 100th participant in India’s unicorn club earlier this month.

The Bengaluru-based startup has raised $50m in Series D from the IIFL, along with existing investors Temasek Holdings, Tiger Global Management and 3one4 Capital.

Founded by Mabel Chacko, Anish Achuthan, Ajeesh Achuthan and Deena Jacob in 2017, the fintech platform helps SMEs automate their finances based on the tools they use and integrates them with their bank accounts. The platform claims that SMBs can easily collect, send and reconcile payments, manage payroll and expenses, automate accounting and benefit from credit to grow their business.

Startup

After working with fintech companies, the co-founders understood the pain points of small businesses.

As an entrepreneur running these businesses, Mabel says, “I found it very difficult to manage my finances and deal with the operational part of running a business. It takes so long that you don’t have enough time to focus on marketing, sales, or hiring the right team.

Mabel says she had to bring in outside finance professionals to help manage the company’s financial records.

However, she realized that this was a problem faced by many people, including SMEs. These small businesses struggled to manage their invoices, payments, and who paid how much.

That’s when she, along with the other co-founders, decided to build something to solve these problems – on the banking side.

According to the team, SMEs in India use many tools to manage their finances, which are disjoint from the banking layer.

“We started to solve this problem by integrating banking services with the tools used by small businesses to manage their finances – invoicing, payments, reconciliation, accounting, expense management, payroll, etc.,” Mabel told YourStory during our interview. a previous interview.

Open launched its first alpha in December 2017, which aimed to allow businesses to open a digital-only account to collect money and link a bank account to withdraw money. It deployed this version to select 500 companies over a three-month period.

“I vividly remember how difficult it was in the beginning to onboard a banking partner, especially since the concept of neo-banking was so new in India,” Anish said.

Based on feedback, Open improved the product to include payment collection and bulk payment methods in its beta version, which launched in April 2018. More than 10,000 businesses were using this version.

“We were the first neobank in Asia and no one understood the product we were building. We faced some high-profile issues, but each round of fundraising brought a different challenge,” Deena said. His history.

“We had to rely on user feedback and product experience to crack it. The key learning, and in many ways the eureka moment for us, was the importance of having a proper checking account and the ability to link existing ERP/accounting software on the Open platform,” Mabel said.

Currently, Open has three offerings: Open Money and Openbook (to help businesses automate their finances), BankingStack (a platform that enables financial institutions to launch new digital banking products), and Zwitch, an integrated no-code finance layer that allows companies to integrate financial services into their platforms.

The platform has more than 2.3 million SMEs as customers and processes more than $30 billion in annualized transactions. It claims to add more than 100,000 SMEs every month.

The startup is now gearing up to launch three new products: Open Flo, a revenue-based financing product for e-commerce businesses; Open Settl, an early settlement credit offering, and Open Capital, a working capital loan offering for SMEs.

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