Neobank

Subject – Economy

Context – Neo-banking platform Open raises $100 m from Temasek, Google, SBI Investment

Concept –

Open, a Bengaluru-based SME-focussed neo-banking platform, has raised $100 million in Series C round from Temasek, along with the participation of Google and SBI Investment.
Founded in 2017, Open offers a neo-banking platform that integrates all the tools used by small businesses and integrates it with the business current account.
- The Open platform powers close to 2 million SMEs and processes over $20 billion in annualised transactions.
- The platform also adds over 90,000 SMEs every month, making it the fastest growing SME-focused neo-banking platform globally.

What is Neobank?

A neobank is a kind of digital bank without any branches. Rather than being physically present at a specific location, neobanking is entirely online.
It’s a wide umbrella of financial service providers who beseech today’s tech-savvy customers. Neobanks can be called fintech firms that provide digital and mobile-first financial solutions payments and money transfers, money lending, and more.
Neobanks don’t have a bank license of their own but count on bank partners to provide bank licensed services.

How does a neobank work?

Unlike a traditional banking system, neobanks have a completely different business model altogether. But, like traditional banks, neobanks do make money marginally between money inflow and lending.
And, since there isn’t a physical location and that they’re completely online, the customer fees are slashed by a significant amount. Because Neobanks are customer-centric, they provide personalized services to their customers that are fired up via technology.
Data-driven decisions drive the decision-making process of a neobank. Since their platforms are also very modernized, it becomes easier for them to collect and analyze data and understand how their customers behave in the neobanking ecosystem. Based on these observations, they create cohorts of customers based on their actions rather than merely sticking to one or two data points.