Open co-founders Mabel Chacko, Ajeesh Achuthan, Anish Achuthan and Deena Jacob (L-R).
Business-to-business neobanking platform Open has received in-principle approval from the Reserve Bank of India (RBI) for a payment aggregator (PA) licence, the company said on November 14.
A PA provides payment services to merchants and e-commerce sites by accepting payment instruments from customers. As part of the process, they pool the funds received from customers and transfer them to merchants after a certain time.
"We are delighted to receive the in-principle approval from RBI for our payment aggregator licence and will help us in enhancing our existing product capabilities and innovate new solutions to automate finances for millions of SMEs and small businesses in the country," Open co-founder and chief executive officer Anish Achuthan said.
In a new set of guidelines in March 2020, the RBI mandated that all PAs be authorised by the central bank. The regulator told non-banking companies offering PA services to apply for authorisation by June 30, 2021, a deadline which was extended to September 30, 2021.
Other players who have received RBI's approval in principle for the licence include Razorpay, Pine Labs, Innoviti, Stripe, Cashfree, CCAvenue, MSwipe, NTT Data Payment Services, Easebuzz and 1Pay Mobileware.
Founded in 2017 by Anish Achutan, Ajeesh Achutan, Mabel Chacko, and Deena Jacob, Open focusses on small and medium businesses, startups and freelancers by offering them a business current account and services such as automated accounting, bookkeeping, expense management, compliance and payroll.
Like most fintechs, Open serves as a tech platform, providing these services in partnership with banks such as ICICI Bank, Axis Bank, Yes Bank, Equitas Small Finance Bank, Kotak Mahindra Bank and State Bank of Mauritius India.
The startup also has an end-to-end embedded finance platform Zwitch that enables fintech and non-fintech companies to launch digital banking services, and BankingStack, a cloud-native fintech operating system for financial institutions to launch digital banking solutions.
Besides PAs like Razorpay, CCAvenue, PayU, BillDesk etc, a host of other players including PhonePe, BharatPe, Cred, Tata Group, Amazon, Zomato, etc too applied for the licence.
A PA is different from payment gateways. Payment gateways provide technology services to businesses for processing transactions and are not involved in the handling of funds.
E-commerce and other players, in the absence of the licence, either tie up with a bank that can aggregate payments on their behalf, driving up costs for payment collections services or depend on a PA, leading to more business for these licensed entities.
"We have a very proactive regulator who has played a major role in making India one of the most advanced fintech ecosystem in the world by introducing regulations and frameworks that benefit everyone in the ecosystem and most importantly, building confidence among the end consumers to adopt digital payments and banking whether its tokenisation, account aggregation, payment aggregator license or the RBI sandbox," Achuthan added.
In May, Open became the 100th Indian unicorn, a startup valued at $1 billion or above after it raised $50 million led by IIFL.
