IIFL Finance Limited and Open Financial Technologies have announced the launch of its joint venture (JV) to launch India’s first neobank for MSMEs customers.
The initial capital of the joint venture company will be Rs.120 crore, and the JV composition between IIFL Finance and Open is 51:49. The name of the joint venture would be IIFL Open Fintech Private Limited.
“Through this JV, Open would get a recurring annual SAAS fee per customer for offering technology services to the JV. Additionally, they would also be able to leverage the lending book and infrastructure of IIFL Finance to offer innovative lending solutions to the merchants on their platform. The lending solutions can be offered by Open without taking any lending/First Loss Default Guarantee risk. Open would get incremental revenue from fees generated for lending solutions provided,” the statement said.
IIFL Finance has over 8 million customers and a presence in 3000 locations. Over 95% of IIFL Finance’s loan book caters to micro-enterprises. With this JV, IIFL Finance would be able to offer neo-banking services to all its customers. Banking, Accounting, Billing, and Reconciliation services would be offered at a click to IIFL Finance’s customers. This would help in getting complete insights into users’ business transactions leading to better underwriting decisions.
Additionally, the credit solutions to Open’s existing 2 million merchants would lead to incremental lending book formation.
For the JV entity (IIFL Open Fintech Private Limited) would be no technology capital expenditure as the same is being Offered by Open on a per-customer basis. IIFL Finance’s existing customer and branch network would be utilized for customer acquisition leading to lower customer acquisition costs. This would also give a head-start to the JV compared to all other newer neo banks. The JV would be earning a revenue fee from IIFL Finance for offering lending services. Additionally, transaction revenue from all payments, cards, and value-added services would accrue to the JV.
Commenting on the launch of the IIFL Open Fintech Neobank Nirmal Jain, Founder, IIFL Group and Managing Director, IIFL Finance said, “We are excited to announce this joint venture which can genuinely transform the banking and borrowing experience of millions of MSMEs. Currently, the long tail of 63.3 million MSMEs is deprived of credit and therefore growth. The unfulfilled credit need for such customers is estimated to be INR 37 trillion. What these MSMEs need is simplified banking and what banks need is verified transaction and business data. The neo-banking that this JV proposes to offer, will meet requirements of both sides and drive financial inclusion and economic growth at bottom of the pyramid.”
“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. Its unique structure of technology and credit underwriting for a variable fee can potentially make it profitable from the first year itself,” Jain further added.
Speaking on the strategic partnership, Anish Achuthan, Co-founder and CEO of, Open said, “We have always felt that the needs of micro-businesses are a lot different than the current MSMEs which we cater to at Open and Open has never been focused on the consumer neo-banking space. We are excited to join hands with IIFL Finance is 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. Further, the joint venture can add a lot of synergies to Open as we are getting ready to launch innovative products like revenue-based financing, early settlement, working capital loans, and business credit cards on the Open Money platform.”
