Open Secures $100M Funding Backed by Google and Temasek

Google Invests in Indian Neobanking Platform Open

A significant investment has been made in Bangalore-based Open by Google, marking the tech giant as the newest prominent investor supporting a neobanking platform.

Series C Funding Details

Open announced on Tuesday the successful completion of a $100 million Series C funding round. This round was spearheaded by Singapore’s sovereign wealth fund, Temasek, with participation from Google, Japan’s SBI Investment – distinct from India’s SBI bank – and existing investors Tiger Global and 3one4 Capital.

According to a source with knowledge of the deal, this new funding elevates the four-year-old startup’s total funding to $137 million and establishes a valuation of $500 million. Reports from TechCrunch in June indicated that Open was actively engaged in discussions with Temasek and Google to secure this $100 million investment.

Future Investment Plans

Preparations are already underway for another funding round, with investors like Visa anticipated to participate, as indicated by another informed source.

Open’s Core Functionality

Open functions as a neo-bank, providing small and medium-sized businesses (SMBs) and larger enterprises with a comprehensive suite of banking features, alongside specialized tools tailored to business requirements. Many SMBs in India face challenges related to managing multiple bank accounts, tracking daily expenses, and processing employee payments.

The platform currently serves over 2 million businesses, facilitated through partnerships with more than a dozen leading banks across India.

Expansion of Services

In recent periods, Open has broadened its service portfolio. Anish Achuthan, founder and CEO of Open, revealed in a TechCrunch interview that the startup now licenses its neobanking technology to banks on a white-label basis, enabling them to offer it to their clientele.

“We are empowering banks to develop their own cutting-edge digital banking platforms,” Achuthan stated. The company is also assisting other fintech startups in building embedded finance solutions and other fintech applications.

Introducing Zwitch

“We’ve come to realize that our infrastructure is capable of supporting other fintech businesses in establishing their own card issuance and other digital banking services,” Achuthan explained. This offering is branded as Zwitch.

Shifting Dynamics in Fintech

Open’s growth trajectory has spurred innovation within the sector, fundamentally altering the relationship between banks and fintech companies. Fintech founders have shared with TechCrunch that, historically, Indian banks were often hesitant about neobanks, making partnerships difficult to secure.

Industry Analysis

Analysts at Jefferies noted in a recent report: “Neobanks are increasingly recognized as platforms for digitizing banking or bank-like services for millennials and SMBs. The top four global neobanks are valued at $100 billion, and Indian fintechs are making inroads with companies like Open, RazorpayX, Fi, and Jupiter.”

They further added, “Many Indian fintechs are planning to evolve from 1-2 platforms to full-fledged neobanks over the next 3-5 years, with incumbent banks and NBFCs actively partnering with them. Monetization, however, remains a future consideration.”

The Monetization Challenge

The question of monetization remains a key challenge for the industry. During a virtual conference hosted by Razorpay last year, Pine Labs CEO Amrish Rau humorously remarked that he and CRED founder Kunal Shah had invested in nearly every neobanking startup in the country, hoping they would eventually discover a viable path to profitability.

Jefferies analysts elaborated: “For neobanks targeting millennials, payment fees are minimal in India, and BNPL is still developing, primarily serving non-prime customers. Building strong relationships and leveraging partnerships for cross-selling will be crucial for success. Conversely, SMB-focused neobanks are enhancing engagement with business clients by providing solutions such as automated invoicing, collections/payments, accounting, inventory and sales management, taxes, and, in some cases, interest on current deposits.”

Global Expansion Plans

With a team of approximately 500 employees, Open intends to utilize the new capital to expand its offerings and venture into international markets, including Southeast Asia, Europe, and the U.S. The company will initially focus on the Southeast Asian market, according to Achuthan.

“We have already established partnerships with one bank in Vietnam and another in the Philippines,” he said. “Our entry point there will be the enterprise business.”

Strategic Acquisitions and Talent Acquisition

The startup is also exploring potential strategic mergers and acquisitions in India and other markets and is actively seeking to recruit additional talent.

Investor Perspective

Pranav Pai, Founding Partner and CIO at 3one4 Capital, stated: “The Open team has effectively combined deep domain expertise and a product-focused approach to deliver a full-stack solution that prioritizes SMEs. This platform has become the benchmark for business banking and will extend this comprehensive approach to new areas and regions. We are pleased to continue our partnership as Open evolves into a global fintech innovation leader.”

Google’s Continued Investment in India

Open represents the latest in a series of investments made by Google in India over the past year. The company has pledged to invest $10 billion over the next few years and has also backed Indian startups Glance and DailyHunt. Furthermore, YouTube acquired social commerce startup SimSim in July of this year.