Even as negotiations with the global technology majors like Amazon and Google are underway, Open is also in talks with a leading sovereign wealth fund as well as private equity firm TPG as they look to participate in the funding round that could be oversubscribed, sources said.
“Visa is already a partner for Open and is in talks to participate in this round alongside Amazon and Google. The sovereign wealth fund may end up leading the new round,” one of the people mentioned above said. “There won’t be a conflict between Amazon and Google to invest together since neither of them are investing for a majority stake. The final contours are being worked out now and should be done over the next six weeks or so,” the person added.
Bengaluru-based Open has recorded a near ten-fold growth over the last 18 months as the pandemic pushed greater digital adoption by small businesses.
If the deal goes through, it would be significant for the neo-banking space, which has been a buzzword for over a year now. Amazon is currently building its own digital banking platform that’ll allow its local sellers to open current accounts, manage expenses and also avail lines of credit from an array of partner banks.
Open, founded in 2017 by Anish Achuthan, Ajeesh Achuthan and Mabel Chacko, offers business banking, payments and expense management services to over one million small and medium enterprises. It claims to process $24 billion in transactions annually.
CEO Anish Achuthan declined to comment on developments, while emails sent to Amazon, Google, Visa and TPG did not elicit a response till press time on Monday.
A neo-bank can be a transactional platform for merchants, an account manager or can be a lending service as well. Besides Open, other prominent neo-banks in India include Jupiter, RazorpayX, and Niyo. Amazon and Paytm are also making nascent forays in this space.
Globally, neo-banks such as Revolut, Chime and
are the foremost companies in this space. Revolut has recently announced plans to enter India.
However, in India lack of regulations have somewhat hindered the growth of this sector as banking regulator RBI does not recognise these companies as a separate class of banking intermediaries yet.
Hence, neo-banks in India are loosely defined and don’t follow any standard regulatory code. Rather, the regulations follow the nature of partnerships they form with the licensed lenders. However, a fully functional neo-bank may need approvals to be a business correspondent, a payment aggregator and require a formal agreement with a regulated bank detailing ethical lending practices.
Anish Achuthan and Chacko, who have previously worked at payments firms PayU and Citrus Pay, are also looking to bulk up its leadership team as it prepares for the next stage of growth, sources added.
The company is estimated to be onboarding close to 50,000 new businesses every month and has set a target to have 5 million paid subscribers by the end of the year.
Prior to this, Open has raised $45-50 million from investors like Tiger Global, 3one4 Capital, Speedinvest and BetterCapital, among others. In February, the company announced the acquisition of Optobizz, a GST and financial automation startup, for $5 million in a stock plus cash deal.