Fairfax Financial Holdings Ltd-backed non-bank lender IIFL Finance Ltd and SME-focused neo-banking platform Open Financial Technologies Private Ltd, on Tuesday said it will launch IIFL Open Fintech Pvt Ltd.
The joint venture claims to be India’s first neobank to cater to the banking and credit requirements of micro and small enterprises (MSMEs).
The initial capital of the joint venture company will be Rs 120 crore (around $15.7 million) and the composition between IIFL Finance and Open is 51:49, the statement said.
IIFL Finance will leverage Open’s consumer neo-banking platform to offer additional services to its clients.
IIFL Finance and Open aim to target the financial needs of this segment.
Founded in 2017 by Anish Achuthan, Mabel Chacko, Deena Jacob and Ajeesh Achuthan, Open has a robust technology stack, used by several banks across India. It has onboarded over 2.3 million small and medium business merchants on its Open Money platform.
Recently, Open raised $50 million in its Series D funding round led by IIFL Finance at over $1 billion valuation, making it the newest unicorn in town, or a privately-held startup at a valuation of at least $1 billion.
Through this joint venture, Open would get recurring annual SaaS fees per customer for offering technology services. Besides, Open said they would leverage the lending book and infrastructure of IIFL Finance to offer innovative lending solutions to the merchants on their platform.
"We are excited to join hands with IIFL Finance in launching a neo-banking offering for the micro-businesses and consumers combining the strengths of Open in the neo-banking space and IIFL Finance on the lending side with access to its 8 million customers," said Anish Achuthan, Co-Founder and CEO, Open Financial Technologies Ltd.
IIFL Finance Ltd is a retail-focused diversified non-banking financial company (NBFC) in India, that offers loans and mortgages via its subsidiaries - IIFL Home Finance Limited and IIFL Samasta Finance Limited.
Through its subsidiaries, it offers home loans, gold loans, business loans, microfinance, capital market finance and developer and construction finance.
It claims to have a presence in 3,000 locations and it has over eight million customers.
"The neo-banking that this JV proposes to offer, will meet the requirements of both sides and drive financial inclusion and economic growth at bottom of the pyramid," said Nirmal Jain, founder of IIFL Group and managing director, IIFL Finance.
“The joint venture will enable customers to open an account in less than two minutes without visiting any physical branch and access all banking features on the app itself. The best part for the customer is that accounting and reconciliation will be auto-matched," Jain added.
