Open: Building Asia’s 1st Neobank for SMEs

Devika Garg

Welcome to Power Conversations at RBL Bank. This is a special edition series where we are in conversation with inspiring women founders, who will share with us their startup journeys. In today’s episode of leading ladies, we are welcoming Mabel Chacko co-founder and CEO of Bank Open, Asia’s first Neo Banking platform offering business banking solutions, fully digitalized for SMEs. Mabel is a serial entrepreneur and a digital fintech innovator. She, along with her partner, Anish has founded three startups prior to Open. Their first startup Cashnet, a mobile plug and play and financial inclusion solution was launched in 2007. They thereafter built Neartivity Wireless, the NFC based payments processing platform in 2009 and followed that by Switch Payments, India’s first developer led payments platform in 2013. This was later sold to Citrus Pay in 2015. Mabel is one of India’s leading women in FinTech and has been conferred with many awards, including the woman leader of the year award by, the India FinTech association in 2019 and startup leader of the year award by the Ministry of Electronics and Information Technology Government of India. I am absolutely delighted to welcome you Mable and I’m so looking forward to our conversation from one traditional banker to another, neo banker, I think this is going to be a conversation that will give us many insights. Welcome to Power Conversations Mabel.

Mabel Chacko

Thanks a lot Devika. That was a wonderful introduction that you did for me. Truly appreciate that. And it’s so awesome to be talking to another woman in FinTech, in financial services, about, women entrepreneurship and, and other things. So it’s very wonderful to have this conversation with you today.

Devika Garg

So I’m curious Mabel, your previous startups have been largely in the payments space. So I want to understand that what is it that you all were trying to solve for when you launched open? What were the gaps that you saw that you went, from payments, which is largely your area of expertise into Neo Banking?

Mabel Chacko

So, one of the things we figured out was that, so much of transactions that happen through the online payment gateway and, other methods, so much more happens directly into the bank account and, in my previous stints at Switch, Citrus Pay & PayU, where I was leading marketing, I got a lot of insights from users who used to say that, you’ve done this to solve, help me to reconcile all the transactions that are happening through the payment gateway, because I get a settlement report and I know exactly who made that payment, but then my Bank account is so complicated and I always track things using UTR numbers, and unless I get the UTR number from the user, I’m really not sure whether the payment has come in as been for this particular invoice or not. So that, somewhere, was a very big eye-opener for us seeing that there’s so much more transactions that happened directly with the bank account. That’s ultimately even if you do settlements through payment gateway it is going in the bank account. So, the bank account being such a powerful tool where all the money coming in and money is going out, if you’re able to make that smarter in some way it would become, it would ease out a lot of other hassles, which actually lead to these two to four hours of a week for small business owners that they spend in your, this basic recon and accounting tasks. So, those are things where, we started working upon the banking layer, and then maybe what we realized is that all the tools that small businesses or other businesses use, I’d all disjointed from the banking layer itself. And the thought was to integrate all of that in one single layer, integrate it along with the banking layer and then offer it to small businesses so that it becomes a more powerful tool. The bank account itself becomes a more powerful tool, that is able to automate all these tasks. So that’s how the part process for starting Open began. And, I would say that none of these things are something the banks have not already thought about. So a lot of things like, It’s just, it’s always been available for slightly larger set of users, and most of the small businesses tend to be on the retail side of things. Whereas, there are transaction banking groups that cater to specific needs of slightly mid to large enterprises and clients. So try to democratize that and make that a little more available for small businesses, and at the same time, for the partner bank not be something that becomes a cost overhead or becomes a liability. So try to find a middle ground of where all the services can be enabled, even for the smaller guys, irrespective of whether they do crores in transactions or lakhs in transactions and yet make it a profitability engagement both for the partner bank as well as for the fintechs and everyone else involved in the entire ecosystem. So that’s a thought envision by which we started out with a Neo Banking. Yeah. I mean, even on the regulator side as well, if you see, Indian regulator RBI is, much more proactive than, other markets like US or UK where PSP two and other things came in and then drove that option. Here RBI has come up with a way for fintechs to work along with banks and be in a regulated environment, banks also ensure that, the fintechs that they deal with, don’t really are not fly by night operators, that they take compliance seriously, there are a proper reporting and audit and things happening. So in the market that we, we will start to her then, many developed markets which was a surprising thing that came to me. But yeah, I’m so much happy that, I’m doing this here now in FinTech in India and not in some other part of the world.

Devika Garg

You talked about regulator and we will come back to that in detail. Also from what you just shared with us, it is very clear that going forward, the FinTech market in India and the banking market in India would largely constitute of a collaboration between the traditional bank and the Neo banks. So this is going to be the way forward for us to give an enhanced and a much more productive customer experience to clients, be it corporate or individual, right. Be it on the corporate side or the retail side. So what, I would like to understand from you, what are the strengths of the traditional bank today that you see play out? What are the strengths of the Neo bank and what areas, or what synergies would want to focus on for this to be a successful partnership and collaboration?

Mabel Chacko

Devika, many times in my conversations with other FinTech founders in some not just in India, but some other parts of the world they come up with this thing that Bill Gates once said that, “banking is necessary, banks are not. And, I don’t really believe in that because banks are great fund managers. They know exactly, how to handle the money, how to make it grow for the customer and all of that. Those are not things, that is not the attitude that I really appreciate from fintechs saying that, you go in with the attitude that I am going to make it everything very easy and banks become irrelevant, not relevant in the scheme of things. That’s the very wrong approach. You go in, into a partnership with a bank saying that listen, you’re great at doing whatever you’re doing, but there’s a speed to market that a FinTech is able to achieve, or make it more viable for a bank to give those services to a new segment of users, which would have otherwise been either unbanked or, existing only in the retail part of the banking part and make it more powerful for the bank to reach out to the new segment of customers. And that is the attitude. And that is the partner attitude is really required from fintechs in India and in other parts of the world going and saying that, I can do better banking, not really, banks definitely know banking much more than any of us put together, their years of experience beyond that. And, they are great fund managers, Banks are absolutely required and they’re not going anywhere, right. The partnership starts at the point where banks says, okay, yes, there is this new segment of users that I would want to reach out to. And fintechs says, I would help you achieve that and reach out this segment of customers without it having to cost you money for it. And, and that is where the partnership really starts, that if you put fintechs and the banking layer, the financial institution together, then there’s a lot of things that you can achieve. Be it, reaching out to new segments of users being, finding better ways to service existing customers, be it providing a better user experience or, reaching out and, getting into different kinds of services as well that typically banks may not have actually gone into, like for example, banking and accounting together, right, the ability to drive power and reduce the time for the end customer is possible because of that partnership between the bank and the FinTech coming in together.

Devika Garg

Mabel let’s talk a little about Open now. Please help us understand what are the capabilities that you have built, and what are the capabilities that you’re looking to build going forward to tap into rural market which is where the mass market is even for SMEs, and to improve profitability because that is always been a key challenge for Neo banks across globally, as well as in India. Do share some insights with us on this.

Mabel Chacko

So Devika, we started with a Neo banking approach where we have a partner bank or couple of partner banks now. And, you start with the current account, which is the core or the heart of the entire Neo banking engine and around that build tools everything that is required to ensure that you’re able to reconcile all the money that is coming into the account. Now, be it in, in the form of invoicing tools, accounting tools, raising eway bills or and different mediums of that purchase order. And a lot of other things, things like complexities of that in the scheme of it, be it online collections in the form of a payment gateway or payment link. so all of these that money comes into the account, try to expose as many layers possible to try and identify where all the money’s coming from.

And then ultimately once the money’s come in and when you’re using the funds for doing the vendor payout or paying salaries, tagging it to the appropriate categories, ensuring that, there are mechanisms in place for that to happen, so that you’re able to know exactly where the money is coming from and whether it’s going to so otherwise you just reduce the need for having multiple bank accounts. The main account itself becomes powerful enough, because auto reconciliation kicks in and they are able to do automated accounting, then all the other things like building a profit and loss report balance sheet, and, , all your standard bookkeeping reports, it just becomes so much more easier rather than, getting in manual intervention to it to integrating a lot of other things like expense management, the ability to take your business online or come up with, if someone wants to know, especially during the pandemic, we’ve seen a growth of, businesses going online, traditional businesses going online, wanting to build their online presence for themselves now, whether you want to integrate it along with the tool to start an e-commerce website or for, for a store to quickly go online, and, start selling online through Facebook or through other platforms, bringing a lot of those powerful tools and integrating it directly into the banking layer.

So those are the things that we’ve been able to achieve so far in our three-and-a-half-year-old journey with Open. Now going forward, we would love to see, how, we sit on a lot of data about the businesses who use our platform, how this can be used along with the partner bank to give better lending or better access to funds if there’s an intelligent, more intelligent way to underwrite loans for these SMEs, those are things that we would see working going forward along with our banking partners. There’s a lot of data we have in terms of receivables & payables. What their payable cycle is, their receivable cycle is working along with banks & NBFC is to underwrite those loans, help them decide on funds and, making that accessibility to the SMEs is something that, we are actively working on right now. And as you said, very truly, so far, most of our users have been from Tier I & II, Tier III is a different ballgame altogether. There’s a lot of localization regionalization that is required when you’re going into Tier III. So that definitely would be, things that we would be looking to do as we grow into the Tier III market in India as well.

Devika Garg

Mabel you mentioned the pandemics, so it will be very important for us to also understand what the impact of the pandemic has been on Open.

Mabel Chacko

So, FinTech overall didn’t see so much of a bad impact. Infact it’s only been a good impact, a positive impact thankfully for FinTech as a segment in India. We saw a growth in the number of users who were adopting the platform, going into the lockdown. Going into the pandemic, we were somewhere around 4.5 lacs SMEs were using our platform over the past few months. We’ve seen that grow to roughly 700,000 that’s 7 Lac users who were using the platform today. We have seen a surge in transactions as well. We process more than a $15 million in transactions through our platform. So those are some of the things that we have seen. Definitely a new segment of people who are going online, who are otherwise offline, like your gym instructor, yoga tutor, tuition teacher, these are all now suddenly also the micro entrepreneurs who have gone online with their businesses rather than, just the traditional format of just collecting payments over cash or GooglePay. The other segment that have started realizing that, earlier if you would have seen they would have been in the retail savings account part of banking because yeah, they were, I wouldn’t say they were unbanked they were definitely banked, but at the same time, they were always using their savings account for collecting payments because they would just have a smaller, a society or one area of a city where they cater to. But suddenly the guy who was sitting in Indiranagar is able to train someone sitting in Gurgaon. So his business is booming, right? The yoga instructor is suddenly seeing a surge in demand of his businesses, and he’s able to cross borders and state borders and tutor someone sitting in some other state or some other country altogether. So that’s when he started taking it up more as a business and more seriously, and you started seeing the segment of people coming into the business banking realm of it. They suddenly started seeing that. Can I get a current account? Can I get a, my client in US is asking me to send payments, how do I go about collecting international payments? these segment of people came online only because of the pandemic. And that is the surge that we’ve seen in terms of adoption on our platform as well.

Devika Garg

So Mabel, that sounds very promising and I’m sure that the growth that you envisage you will deliver over and above that, but in order to do that regulations, you mentioned RBI and how strict and stronger regulator RBI is. It’s considered one of the top three in the world if I’m not mistaken. So I would like to understand from you that what are the challenges that Neo banks today face when it comes to regulations and what is the wishlist that you would like to have? I know that we are still to see a license being given to digital banks, but there would be apart from that, there will be certain wishlists, certain regulations you would like to be seen unfold that could help scale up this opportunity quicker. And like I said, in a far more integrated rate, along with the traditional banks.

Mabel Chacko

Yeah Devika. So I had mentioned earlier RBI, you rightly said RBI is among the top three regulators in the world. And they are very proactive regulator. I’ve seen it before when it came to cryptocurrency or whatever we’ve seen them in active be taking they’re always conscious of what is happening in the different parts of to the world. And they’re constantly noting that. When it comes to a Neo banking, per se, there’s no clear regulation out there. Eventually we do see that, there would be a digital bank license or something similar to what’s happening in Indonesia and Singapore, Malaysia those markets coming into the Indian FinTech world. So that’s something that would eventually happen. But at the same time my wishlist from the regulatory perspective would be that, it would be good to have some kind of a guideline on how a bank and FinTech partnership happens, what are the basic criteria that, we need to say, for example, is it ISO compliant or, whatever is PCRDC compliant, those things would bring in some clarity around what other things that are required. And then it’ll become more easy to partner with multiple banks otherwise today, you complete all the things that are required from the business teams, from the product team, from the technical team. And then finally you reach the compliance team and, everything gets stuck, at different levels. So knowing what is the compliance that, FinTech needs to do in order to work with a bank, that would be really helpful and some clarity around that would be really helpful.

Devika Garg

So moving on Mabel, I would now like to actually know a little more about you and what I’m extremely interested in knowing is this is your fourth startup, right. And please share with us what have been your key learnings through your entrepreneurial journey from one startup to the other what have you learnt along the way, and were there days when you felt very lost and very challenged, and you said, Hey, this is impossible to do, and we should kind of move on to something else. What have been your highs and what have been your lows, but very importantly, what have been the learnings that have kind of evolved from one startup to the other over the last 13 years.

Mabel Chacko

So very true Devika that there have been my highs and my lows, I would say my biggest high is right now when I’m doing things with Open and I’m seeing, adoption for things that we have built in, it’s a very big high that I get from, from seeing user adoption. and I see I get it high because that is also my key learning in all these years of doing startups that, we keep focusing on building the perfect product. The perfect this, the perfect that, but really what we as entrepreneurs should do is build things that the user wants and knowing who that user is, is really important. I wasted, I learnt it the wrong way or the hard way in Neartivity. And that was, the biggest failure I have seen in my life after tried to do NFC payments for almost one and a half years with a 50 member team, I had to lay them off and, at the same time, do whatever best you can in that situation.

So you’re sending their resumes to people in my network, trying to get them pleased through placement consultants or by directly reaching out founders. Those were things that I’ve done now, when I, when Neartivity was happening. And my biggest thing was, if I give a SIM card to a user, so there was a definite lack of NFC phones in the market. So this I am talking about, 2009 – 2010 time period, where there was no mention of NFC phones at all in Indian market. And we were working, breaking our heads on you’re trying to convert the existing phones into a NFC device. And two ways we could do that was one, either a sticker that you can stick onto the phone and MasterCard had these Masterpass stickers that could be used, or having security, having something that resides inside the phone. Now for, Indian banks to be comfortable.

It had to be something that resides inside the phone and not something that can be just, peeled off from outside the phone. And hence we had to look at SIM cards, and the moment you say SIM cards it’s not that any bloke on the road can go and order a SIM card, you need to be working with a mobile operator, right? So our basic premise was the fact that if I give a SIM card to someone and this will convert you phone into an NFC device, and you can just go and tap and make payments wherever you want. People would adopt to that. But that was horribly wrong. I spent a lot of time, almost one and a half years trying to build that entire technology and all of that. And all I should have done was go down and ask someone on the road that if I give you a SIM card would you change your SIM card?

Right. And that is, that was a very hard learning for me. that’s when I figured out that, whatever you want to do, you should know absolutely crystal clear as to who your user is. First, know your audience, know your customer, KYC, that’s what banks also teach us KYC, right. And know who that person is. Who’s going to use your product and then understand what he, what his real needs are. And start focusing on catering to those needs. And then you don’t have to worry about product market fit ever, right. And that was a very hard learning but that’s something that remains with us. And that’s a very core focus for us, be it from, starting days of Open. We took user experience and user feedback, very important, and, we focus a lot around building things around the same thing. Now, the other thing for us in Open is, that we don’t mean to build the perfect product, you build something that is decently acceptable, put it to the user, let him figure it out, come out with the two other, three other things that are required and then start building in working around achieving that. And otherwise as entrepreneurs, I’ve seen many, other entrepreneurs, wasting a lot of time to achieve everything perfect. The perfection should be there before you put things out. It doesn’t really happen that way.

Devika Garg

Also curious to know, how has your leadership style evolved over these years? Again, why we learned about how, what the key learnings have be, has there been a change in the leadership style as well? And also you have, you have four co-founders at Open. So how do you share the responsibilities? What are the rules that have been ascribed to each one of you and how is the collaboration and the synergy between all of you?

Mabel Chacko

Absolutely very important parts of doing a startup. We are 4 co-founders Aneesh CEO, and he also heads a business strategy and the bank alliances, everything, all of those has happened with him. I look at operations and marketing, those are my core fortes and so marketing and operations come to me. We have Ajeesh who is the CTO. He takes care of all things, engineering under Ajeesh. And we have Dina who is a CFO, she is an absolutely brilliant woman, badass woman CFO that you can find. We have very clear four areas that we look at for a startup. And then she also heads the lending and wealth management product units that we are working on. So those are very clear four areas, and that’s really important to have that in your founding team, know what your core responsibilities are, so that you’re not overlapping into each other’s territory. And that actually takes out a lot of chaos. Otherwise I’ve seen so many other startups failing just because, the founders just couldn’t get their heads around, who is responsible for what, so that was one good thing for us. At Open, as founders, we have very clear areas that we operate on, and that brings in a lot of synergy and we have the same vision for sharing the vision, knowing what you’re trying to achieve and where you’re going, that goes a long way in building what kind of a leader you are. And between my startups, yes, definitely the leadership has thrown a very different challenge altogether every single time. So Cashnext again was, 25, much smaller team, easy to play around mostly. Same way Neartivity, 50-member team had to layoff folks, so that showed a different kind of leadership challenge altogether when you have to lay off people they don’t really understand your rationale, but at the same time, playing around and trying to help them out in whichever way possible best at giving something back because every single person was, was part of my Neartivity team is still in touch with me. They are not always open, but they’re still very much in touch with me and, keep on updating me about whatever is happening in their lives. So that was very important for me as a leader at that point in time. At Switch, I was a bheegi billi, starting after a failure, was a very small team, hardly 5 of us doing Switch, which eventually got acquired by Citrus Pay. We joined Citrus Pay as employees, and then when we were starting Open, all of us came out and, started Open together. So that wouldn’t have been a leadership challenge for me at Switch. Open has been quite a challenge, from the day we started, we were eight of us who started it. To be around 250 of us today growing and scaling this company every single time, has, added out it’s quite a task to maintain, manage 250 people getting everyone culturally aligned with something that we focused a lot on. And there’s a lot of emphasis on hiring people, not just we resist would go for people for basis their degrees, definitely, qualification does matter, but at the same time, the cultural fit is something that we openly look for. And hence I don’t have a human resources team. I have, we call it a people and culture team at Open because it is about a person was coming in and the culture he brings in that goes around how he’s going to behave within the company, how he behaves after he teams as, as well, all of that matters in hence hiring the kind of right culture fit is something that we look at with priority at, at Open that. At some point of time, I would definitely say there was a lot of focus on hiring more women, and we didn’t have to put too much conscious effort on that on that front per se, because we are two women in a co-founding team, so naturally with women leaders attract more women talent to come into the company as well. So for a very long time, you had a 50- 50 split of people, but obviously when you’re scaling a certain teams terms here in engineering we flipped that ratio a little bit, but still we are very close to 40% women within the company. and that’s something that we want to keep growing as an issue. And you’re trying to get back to the 50 -50 that we were, earlier as well. And there’s a lot of focus on the employee wellbeing per se, and not just the physical, physical is what everyone does, but the mental wellbeing. So we do have a wellbeing officer who takes care of the mental wellbeing of our employees and happy team leads to happy customers. So there’s no other better formula to having happy customers than having a happy team to cater to them.

Devika Garg

That’s very true. Happy team leads to happy work, more productivity, and then happy customers. I completely agree with you. Along the journey Mabel, I’m also very, eager to know who has been your inspiration, what has inspired you, because again, like I said, it’s not easy to be a serial entrepreneur of the nature and of the kind of startups you have founded. So what has kept you inspired?

Mabel Chacko

I would say a couple of things. The very first would be my own mother. She was a banker. I have both parents who are bankers actually. My dad has spent 42 years at state bank of India. My mom retired after 39 years in IDBI. So, definitely I’ve seen women bankers from the very small age that I remember, and I literally grew up in the parking lot of IDBI bank. So seeing my mother how she was as a leader as a woman banker, her leadership skills, whatever she developed over various courses of training that banks would do as well, and a lot of things that she would pass it on to me. So that is definitely a constant inspiration I have in my life. And so when it comes to women and leadership definitely my mother. Otherwise I would say my ex-bosses, Amrish Rao and Jitendra Gupta, they were big inspiration.

I learnt a lot seeing them at Citrus Pay. How they were treating the team, how they took over the startup, how they were running the startup, they gave me great insights on, what a company looks like what are the things that our company, when you, from your, you are a startup, you’re a small team to when you’re a company, how things came dramatically and, what kind of leadership and what type of skill set required for your growth, those are great things that I’ve learned from my mentors, Amrish & Jitendra.

Devika Garg

Mabel you’re one of the most inspiring leaders that we have in the FinTech space, especially amongst women. And I would like you to share what is the advice that you would give to aspiring Mabel Chackos to help them pursue their dreams?

Mabel Chacko

So women always have a toughie. I do believe that women in fintech is a great segment to be in, but, women do have it the hard way all the time, because there’s as Indian women, you’re, you are a caregiver at home, you have home duties and a lot of other things that can bog you down from chasing your dreams, and trying to take off and start following your passion. My advice to every single entrepreneur or every single women entrepreneur in particular is, never shy away from chasing your dreams, never shy away from following your passion. There’s a lot of struggle, yes, definitely. But it’s worth it every single day that you’re doing and being your own boss. Every single day, every learning that you get, it makes it totally worth it. Startup, stand up for yourself and live your dream. Keep dreaming because dreams to come true, mine did, there’s will too.

Devika Garg

Thank you so much, Mabel. This was a wonderful conversation. Thank you so much for your time and wishing you and team Open continued success. May you grow from strength to strength. Thank you.

Mabel Chacko

Thanks a lot Devika and team RBL Bank for having this wonderful conversation.