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OPEN Brings A Neo-Banking Twist To The Untapped SME Market In India

OPEN Brings A Neo-Banking Twist To The Untapped SME Market In India

The fintech space has been in a state of frenzy for a few years now, with a multitude of emerging technologies creating a new breed of banks. OPEN is one of them.

Experienced Player Embraces Disruption

The CEO of OPEN is Anish Achuthan, an entrepreneur with significant experience in the Indian fintech space. Along with associates, he has founded 3 payments startups, namely Cashnxt, Zwitch (later acquired by Citrus Payments) and Neartivity payments. He was also the VP of PayU before starting OPEN.

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His reason for starting the company was because of his experience with the problems faced by SMEs who were clients of his previous companies. According to Achuthan, business banking is “broken” for SMEs, causing the realization that there was a lot of problems in tracing cash flows and managing invoices.

He stated, “They have to use multiple dashboards and interfaces for invoices, bookkeeping, online payments. Making vendor payments and employee payouts has always been a challenge. These processes always used to take out a lot of the time and energy away from entrepreneurs and finance teams.”

Achuthan felt like the current account maintained by businesses is a “a very powerful tool to automate finances”. This is due to the fact that it basically functions as an entry point for all incoming transactions.

The current account offers one place to look at vendor payments, online payments and settlements, along with payouts to vendors and employee salaries. Achuthan went on to say

“If we could track that that saying that the payment is coming to my bank account from we can automate your income, expenses and bookkeeping while your banking happens.”

Filling A Growing Financial Void For SMEs 

SMEs and startups are a difficult market for banks and fintechs to crack simply due to the varied financial instruments involved. Moreover, many SMEs and startups also have specific ways of managing payouts to participants in their ecosystem, which led to a vacuum in the financial services space for SMEs.

After working at PayU, Achuthan realized that banks were not in a position to solve for the problems being faced by startups. He said, “Banking softwares have been built using legacy core banking systems. They have larger teams for each of the business units which work in silos and the business models of the new-age startups and businesses has evolved a lot.”

This has led to banks not being able to understand what their SME customers want, or providing the same services they provide to everyone else. This is what incentivised the creation of OPEN; as a digital bank that will solve the challenges of SMEs.

Regulation And The Neo Banking Formula

India has stringent laws concerning the procurement of a banking license in order to prevent misaligned parties entering the banking system. However, this was a problem for OPEN, spurring the discovery of new methods of operation.

On his journey navigating the regulation space, Achuthan stated

“We looked at how internationally this is being solved. We came across a lot of Fintechs which offer a lot of banking services without a license by partnering with a bank.”

This model is already being used worldwide, with examples seen in Revolut and Simple, who outsource their banking responsibilities to those with licenses.

“They partner with the bank and offer an end-to-end business banking or consumer banking services. For the end customer, the banking services are offered by the fintech but in a regulatory perspective the money is being managed by their partner banks.”

Using Achuthan’s vast network in the fintech space, OPEN was able to secure a partnership with ICICI Bank as their supporting bank. This removed one of the most important, and difficult, steps of getting the startup off the ground.

The only thing left to do was take on banking giants, which Achuthan says a lot of fintechs are doing well. He stated that fintechs are “doing good and posing a strong threat to regular banking.” This makes OPEN an SME-focused banking startup with a smart current account.

Employing AI/ML In The Tech Stack

What sets OPEN apart is the fact that they have built their architecture keeping the flexible nature of SMEs in mind, along with the power of emerging technologies. Achuthan mentioned the use of a lot of tools to make the banking experience smarter.

One of these is integrated invoicing, using which it becomes a lot easier to raise invoices to clients. This functions in conjunction with the online payment gateway that is built by them to remove dependencies on third-party gateways. He elaborated, “Along with that, we offer tools to help them track where the money is coming in and where the money is going out.”

Instead of like a normal bank statement where you’ll see transaction reference numbers, here it will exactly show the transaction with the invoice.”At the heart of OPEN is an automated bookkeeping engine that automatically generates a profit and loss balance sheet visible on the platform. In a nutshell, Achuthan described OPEN as

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“…a business current account which helps the businesses automate its finances. We considerably reduce the time and effort required for reconciliation, in a simple and intuitive interface.”

Fintech Driving Disruption For SMEs

Achuthan was able to effectively utilise the knowledge and learning he gained at PayU and Citrus, along with the vast network, to supercharge the growth of OPEN. Having handled about 3 lakh SMEs in his previous jobs, he was able to gain a lot of perspective into how financial institutions operate.

This helped OPEN build “relationships and partnerships,” said Achuthan. He went on to state, “My experience also helped in terms of bringing products to solve for the challenges in the Fintech space. It gives a lot of insight into how you acquire customers.”

OPEN also competes at a lower price point, around INR200 per account. This is also due to Achuthan’s experience with his past companies. He went on to say

“[Working at Citrus and PayU] was a learning experience where we had to bring in 5000-10000 SMEs every month. The previous experience came handy when we were dealing with OPEN.

This information has also come in handy when integrating intelligence into its tech stack. The predictions that can be made by using OPEN’s algorithms allow for better treasury management. Achuthan stated, “We have a lot of information of the customers like the money they have in their account, the kind of amount they pay to vendor, the money they have in other accounts. These can be used to provide a lot of solutions for lending and wealth management.”

He also stated that this is a big part of the move of traditional accounting towards automation. There is no more need for accountants to manually create profit and loss balance sheets.

Disruption On The Horizon

However, there might be further room for disruption by technologies such as blockchain.

“What we have seen is that even banks are very much supportive in terms of blockchain. As of now I still feel like it is still some years away from us seeing the commercial deployment of the technology. The pilots are taken seriously by the industry players.”

With the thought that the fintech space is maturing to the use of technologies, a brighter picture for the future begins to materialise. With startups like OPEN paving the way for a smarter tomorrow for SMEs, the disruptive world of fintech never has a dull step.

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