You can be sure the world as you know it is changing when a challenger bank is able to get of the ground with as little as $250,000.
The bank in question is Open, an Indian neobank who hit the news in mid July, announcing it would launch a mobile first banking platform to support India’s growing mobile orientated, micro-business community. Rather than acquire its own license, it appears Open will borrow a wholesale license from an approved Reserve Bank of India institution.
Backing the business are two executives from the Indian arm of global payments provider PayU; CEO, Amrish Rau and Managing Director, Jitendra Gupta.
India has had a longstanding tradition (in fintech years anyway) of encouraging innovation in its banking sector. The biggest legacy its regulators have created over the past few years would be its issuance of payments bank licences. These licences allow companies to offer basic banking services and accepted some capped deposits, but prohibits them from offering loans or credit cards.
They were originally conceived to increase access to basic banking services to small businesses, low-income households and India’s migrant labour force. Fino Payments Bank was the latest to acquire a payments banking licence, launching its operations in July. It joins other payment banks like Airtel, India Post and Paytm.
Paytm, who already service 200 million customers, only launched their banking arm in May of this year. With the new features, the company believes it can surpass 300 million customers within a few years. For Paytm’s mobile wallet customers, transitioning onto the banking platform makes logical sense, as money held in wallets will be able to accrue interest.
And the interest rates are relatively healthy – especially compared to the anaemic looking ones in western nations. Interest rates offered range between 4% and 7.25% per annum, while revenue streams are derived from ATM charges, online transfers and cash withdrawals.
Open’s immediate advantage will be its ability to offer a full suite of banking services – including credit. However the scale of the Paytm’s and Airtel’s of India will no doubt be difficult to match. And surely these businesses intend on offering credit services at some point. Still, India is a big country, and the opportunity is immense. Open is no doubt banking on the fact everyone can win enough of the banking pie to build a viable business.