Neobanking: The solution small businesses need to put their finances on autopilot

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Published: July 30, 2019 5:00:33 PM

Neobanking, offered by fintech companies called Neobanks, includes digital financial services such as payment and money transfer services, loans for businesses and individuals, savings accounts, and other services such as help in budgeting etc.

There are neobanking companies globally like Revolut, N26, Monzo, etc. that have become unicorns in a few months after launching.

Neobanking, offered by fintech companies called Neobanks, includes digital financial services such as payment and money transfer services, loans for businesses and individuals, savings accounts, and other services such as help in budgeting etc. Also unlike traditional banks, neobanks don’t need to have physical branches and may not be chartered with country’s regulators as financial institutions. For instance, Tiger Global-backed Open offering neobanking services to small business or SMEs right from banking, invoicing, and automated bookkeeping.

“Credit and payment are the biggest challenges for SMEs. Payments to vendors and employees take a lot of time and energy. Moreover, credit cards are really under-penetrated in this market. Out of around 50 million SMEs in India, around 5 million are using some kind of an online tool for their business like for GST filing or payment gateway for payment etc. This is a very large problem to address as traditional business banking has not focused on the needs of these businesses,” Open’s CEO Anish Achuthan told Financial Express Online.

As awareness around digital services spreads deeper among Indian SMEs followed by the adoption, “so over a period of time, there is a much larger opportunity to solve for,” he said as Open today announced partnership with multinational financial services firm Visa to launch a new business credit card along with real-time payments settlement and refunds through API banking suite called Layer. “With Visa, it is a strategic alliance because with them you can have the largest number of banking partnerships in India. They can help you tap into the proper network,” said Achuthan.

The business card will help small businesses particularly startups to manage their expenses and payouts along with issuing it to employees as well to automate reimbursements. “No matter how much capital SME and startup raise in less than three years of their launch, they are still not eligible for credit card but there are a lot of payouts they need to make for services from Google, Amazon etc., that can run anywhere from Rs 15 lakh to Rs 1 crore,” said Achuthan. Open underwrites the credit card’s credit based on the company’s funding and the money they have in their bank accounts.

NiYO Solutions is another neobank. The company offers neo-banking services to the blue-collar segment through its Bharat Payroll Solution primarily in unorganized or semi-unorganized labour-intensive sectors to provide them with a platform to manage savings, payments, investments and financial protection (insurance).

While neobanking is a new concept in Asia but in Europe, there are neobanking companies like Revolut, N26, Monzo, etc. that have become unicorns in a few months after launching.

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