Challenger banks in India: who’s who and what’s their tech
Time to shake up India’s financial services market, say the aspiring challengers. The market is vast and so are its opportunities, from financial inclusion in remote areas to mobile-only offerings for tech-savvy city dwellers.
FinTech Futures has put together a list of the current challenger banks and banking services in India. We’ll be revisiting and updating this list on a regular basis. If you have any additions/amendments to the list, please get in touch with our editorial team.
Last updated: 09 September 2020
- Digital neobanks
A full-service digital bank account launched by Kotak Mahindra Bank in early 2017. It comes with a mobile app, a virtual debit card, up to 6% interest, zero charges on non-maintenance of balance, and free online money transfers.
The app also has a chatbot, Keya, introduced in mid-2019 and powered by Active.AI.
Amica, founded by former Citrus Pay co-founder Jitendra Gupta, plans a launch in Spring 2020.
The bank, which aims to provide savings, investments and lending to millennials, has a partnership with an as-yet unnamed private bank.
Amica has raised $24 million in seed funding, with backing from a list of investors including Greyhound Capital, Rocket Internet and Sequoia Capital.
Mobile-only Digibank was launched by Singapore’s DBS in spring 2016. It offers a broad range of products, including savings/deposits, investments, insurance, loans, cards and remittances.
At the time of the launch it announced plans to onboard five million customers and a deposit base of INR 500 billion ($7.4 billion) over five years.
Digibank offers a simple account opening process: download the app, register in 90 seconds, and get access to an e-wallet immediately. Provide your Income tax permanent account number (PAN) and your Aadhaar number with your biometric-information (Aadhaar is a 12-digit individual identification number issued by the Unique Identification Authority of India), visit one of the 500 local Café Coffee Day (CCD) outlets for biometric verification, and you’re all set to use your “paperless, signatureless” bank account.
Digibank’s customers also get a physical Visa debit card to withdraw cash from 200,000 ATMs nationwide.
By spring 2019, the bank had over 2.5 million customers across India.
For its technology, it uses a virtual assistant/chatbot developed by Kasisto.
InstantPay provides inclusive and neo banking solutions to consumers, SMEs and corporates with “a vision of delivering financial services to the larger India”.
The company’s objective is to drive financial inclusion in country “in a responsible and sustainable way”, it says on its website.
As of H2 2019, it had 50 million unique customers, 1,000 corporate clients and one million daily transactions.
InstantPay was founded in 2013 and is based in New Dehli. It is backed by Marquee Investors.
Indian online lending marketplace Namaste Credit announced in H2 2019 it was becoming a “fully-fledged digital-only bank” for micro small and medium businesses (MSMEs). It aims to be the first one-stop-shop for MSMEs – via its new Namaste Biz app – providing them with lending, banking and accounting services.
Namaste Credit’s co-founder and director, Lucas Bianchi, says: “We believe a technology-based integrated platform that can bring together banks, NBFCs and other stakeholders can completely transform the financial services industry, specially from a B2B perspective.”
Namaste Credit was founded in 2014 in Bangalore as an Indian subsidiary of Opendoors Fintech. In March 2018, the company raised $3.5 million by Nexus Partners as series A funding.
NiYO Solutions was launched in 2015 and is based in Bangalore. It serves SMEs and provides salaried employees and blue-collar workers with access to company benefits and other financial services.
NiYO describes itself as a neobank that relies on established players (Yes Bank and DCB) for underlying services. It offers additional products to clients, such as lending and insurance.
In summer 2019, it raised $35 million in Series B from Horizons Ventures, Tencent and existing investor JS Capital, followed on from the $13.2 million Series A in January 2018.
NiYO plans to expand its business nationwide and explore international markets for some of its products, such as its global travel card, for example. The card is offered with no mark-up fee and NiYO plans to have 500,000 takers of it by April 2020.
According to Vinay Bagri, co-founder and CEO of NiYO, the neobank intends to grow its client base from one million in mid-2019 to five million in three years and is looking to acquire other start-ups.
Open is a start-up in Bangalore that wants to “reimagine business banking”, launched in 2017. It describes itself as a “business banking service that combines everything from banking to invoicing and automated book-keeping in one place”.
It aims to onboard 500,000 micro-entrepreneurs as clients by 2020.
Open is a brainchild of Anish Achutan and Mabel Chacko, serial entrepreneurs, who founded Cashnxt Technologies, Neartivity Wireless, and Zwitch Payments (acquired by Citrus Pay in 2015).
In summer 2019, it raised $30 million in Series B financing round, led by Tiger Global. Tanglin Venture Partners Advisors and existing investors 3one4 Capital, Speedinvest, and BetterCapital AngelList Syndicate also took part. This brought Open’s total funding to $37 million and its valuation to $150 million.
Payzello was founded in 2017 and is based in Hyderabad. It targets the consumer market with a range of digital banking products and a specific focus on personal finance management (PFM).
Payzello describes itself as “India’s first ever neo banking platform challenging the very definition of banking in India”.
In its list of offerings, the firm includes a single card for both debit and credit, app-based loans, money transfer and request, end-to-end expense management, Bharat QR, three minutes’ account opening, among others – and all this with zero paperwork.
A chatbot is included in the app, called Ello.
Payzello partnered with Laxmi Vilas Bank and Yes Bank to provide users with financial solutions, but plans to apply for its own banking licence.
Slice, formerly known as SlicePay, offers young consumers a card with a credit line to help them build a credit history early on.
In June 2020, the start-up raised INR 46 crore ($6 million) in an equity pre-Series B round. The investment was led by Japan-based investor Gunosy, a news organisation which has only invested in three other companies since 2016, according to Crunchbase.
The challenger had accumulated 1.5 million customers in 2020. Its average customer is just 22.
The same year, it claimed to be in the top ten list of card issuers in India, coming in seventh place back in March 2020.
Since March 2020, the fintech has boasted an annual run-rate of 400,000 users. Founded in 2016, the fintech reached profitability in 2019.
Offering a free bank account, debit card, and the ability to request money from friends, the new application sits in line with other challenger brands.
The account will enable unified payment interface (UPI) payments to offline merchants, and rewards for its users depending on their usage.
Founded in 2019 and based in Begaluru, the challenger describes itself as a neobank for teenagers to “learn about the bad world of money.”
The firm writes on one of its social media pages: “It’s important to give financial education to kids early on – teach them the value of money, how the world of money works, how you need to work hard to get money.”
Walrus is led by CEO Bhagaban Behara, who has a string of leadership roles in start-ups and spent two years at Barclays Capital as an analyst and team lead between 2009 and 2011.
Yelo is a mobile-first start-up based in Bangalore. It focuses on gig economy workers, enabling them to bank, pay, get credit and take out insurance with ease.
It is owned and operated by 0.5Bn FinHealth, a company founded in early 2019 by friends and Indian School of Business classmates Nilesh Agarwal and Abhishek Challa.
Agarwal says Yelo is targeting “the segment that is around 80-100 million strong and works for small corporate entities or with aggregators like food-delivery platforms, taxi services and others”.
The company names ICICI Bank and Federal Bank as its banking partners.
In autumn 2019, Yelo raised funding in its seed round from new investors Matrix Partners India, Omidyar Network India and Flourish and current investor Better Capital. It also announced plans expand its team from 20 to 100 within the next 18 months.
YONO, which stands for “You Only Need One” is an integrated digital banking platform offered by State Bank of India (SBI) to enable users to access a variety of financial and other services such as taxi bookings, online shopping, or medical bill payments.
It was launched in November 2017.
Via the YONO app, users can get the standard banking services, such as account opening, fund transfers, bill payments and loans. The app can also be used to make ATM withdrawals.
In addition, YONO offers services from 60+ e-commerce companies including online shopping, travel planning, taxi booking, online education and offline retail.
The New Delhi-based challenger bank aims to “empower HR managers to help them engage their employees in a better way”.
It offers Zyro Gift, a digital rewards and recognition solution. This allows managers to choose from various gifting and incentive solutions for “employee appreciation”.
It also offers travel and expenses management, petty cash management, corporate and virtual cards, banking services, payroll processing and a payment gateway.
Zyro has three banking partners – ICICI, RBL and HDFC.
- Payments banks
A new model of banks created by the Reserve Bank of India (RBI). Payments banks can provide current and savings/limited deposits accounts, debit cards and payment services, but are not allowed to issue loans and credit cards.
In 2015, RBI granted 11 payments bank licences. As of H2 2019, there were five such banks remaining in operation in India.
In early 2017, Airtel Payments Bank became the first payments bank in the country to open for business. It is a subsidiary of telecoms giant Airtel.
Airtel’s 250,000+ retail stores act as the bank’s customer service points to open a savings account, and deposit/withdraw cash. In addition, customers can also get access to a Mastercard online card.
The bank plans to develop a nationwide merchant ecosystem of over five million partners including small “kirana” stores (small neighbourhood retail stores), grocers, pharmacies, restaurants etc.
For its technology, Airtel Payments Bank uses a suite of the Oracle FSS products, including the Flexcube core banking system.
Fino was originally set up as a domestic remittance and paytech company in 2006. It received a banking licence from RBI in March 2017. Its 410 Fino Money Mart outlets were converted into bank branches. It also has 25,000+ banking points.
It is backed by ICICI Group (and ICICI Bank’s products are sold through Fino Payments Bank’s network), Bharat Petroleum, Blackstone, International Finance Corporation (IFC), Corporation Bank, Union Bank of India, and Indian Bank.
The bank offers current and savings accounts, remittances, lending, mobile banking, life and general insurance and bill payments.
Rishi Gupta, MD and CEO of Fino Payments Bank, said at the launch in mid-2017 that the bank planned to acquire 50 million customers with a deposit base of INR 100 billion ($1.6 billion) in five years and build a network of over 100,000 points and 1,000 branches.
For its core banking system, the bank uses Profile from FIS, delivered on a hosted basis.
India Post Payments Bank (IPPB) was launched in August 2018. It is set up under the Department of Post, Ministry of Communications, with 100% equity owned by Government of India.
It operates via the India Post network of 155,000 locations and have 650 offices providing back-end support.
IPPB plans to create and link 170 million postal savings bank (PSB) accounts, which will enable its customers to transfer and receive money from any bank account.
The bank will also be used by the government to distribute wages, subsidies, pensions etc.
It received an investment of INR 14.5 billion ($225.2 million). Initially, the INR 8 billion ($124.3 million) fund was approved for IPPB, but “due to some cost escalation” the investment was nearly doubled, according to the officials.
For its technology, IPPB uses Infosys’ Finacle for core banking processing and Financial Software and Systems’ (FSS) Payments-in-a-Box solution for payments. The FSS tech enables micro-merchants to accept payments over any channel (online, UPI, QR codes, Aadhaar and IPPB accounts) and the at the backend, it is used for onboarding fee calculation, reconciliation and settlement.
In August 2019, IPPB announced plans to convert from a payments bank into a small finance bank to offer customers lending products.
Jio Payments Bank is a joint venture between conglomerate holding company Reliance Industries and the State Bank of India (SBI). It was launched in 2018.
The bank lets account holders deposit up to IND 100,000 ($1,534) in a savings account and it also provides ATM cards, debit cards, and online and mobile banking.
To create an account online, users need to download the JioMoney App. Users can also link their Aadhaar card to complete the verification process.
Paytm Payments Bank was launched by Paytm, an e-commerce payment system and digital wallet company in India. It opened for business in mid-2017.
Around the same time, Japan’s Softbank committed funding of $1.4 billion to Paytm and its banking project (making it Softbank’s largest investment in India). The following year, Paytm scooped $300 million in funding from Warren Buffett’s investment firm Berkshire Hathaway.
The bank is part-owned by Paytm’s founder Vijay Shekhar Sharma and by One97 Communications.
Paytm’s all active wallet accounts (Paytm had nearly 218 million wallets accounts overall by mid-2017) on its payments app were be transferred to the payments bank. In terms of its goals, the bank stated at the launch that it was targeting 200 million accounts, across current and savings accounts, and mobile wallets, within one year of the launch. By 2020, it intends to reach 500 million accounts.
Part of Paytm’s success is also attributed to its close association with China’s Alibaba group and its founder Jack Ma.
Paytm worked with IT services integrator Wipro on the bank’s tech and set-up. Infosys’ Finacle is used as the core system.
- Small finance banks
Small finance bank is niche bank in India, providing basic savings/deposits and lending services. The government introduced this type of bank in 2013 with the aim to boost financial inclusion in the sectors of the economy not being served by the incumbents (e.g. small and micro businesses, small and marginal farmers etc).
The first such bank – Capital Small Finance Bank – opened in India in spring 2016.
Origially launched as vehicle finance company AU Financiers in 1996, converted to a small finance bank in April 2017.
Established as Capital Local Area Bank in January 2000; rebranded and relaunched as Capital Small Finance Bank in April 2016.
It uses Intellect Design Arena’s Intellect Suite for core banking tech.
Equitas Small Finance Bank
Established in 2007 by Equitas as a microfinance lender, converted to a small finance bank in summer 2016.
It uses Temenos’ T24 core banking system.
ESAF Small Finance Bank
Started its operations as an NGO in 1992 as Evangelical Social Action Forum; converted to a small finance bank in March 2017.
It uses FIS’s Profile core banking and payment suite, delivered on a hosted basis.
Fincare Small Finance Bank
Started its life in 2007 as a provider of microfinance loans for income generation purposes to women groups, converted to a small finance bank in 2017.
Jana Small Finance Bank
Launched as a small finance bank in March 2018. Prior to that, the company was one of India’s largest microfinance institutions, Janalakshmi Financial Services (founded in 2006).
The first bank of its kind in the northeast of India, launched in June 2017, backed by non-profit development organisation Rashtriya Gramin Vikas Nidhi (RGVN) and Small Industries Development Bank of India (SIDBI).
It uses FIS’s Profile core banking and payment suite, delivered on a hosted basis.
Suryoday Small Finance Bank
Launched as a lender in 2008, converted to a small finance bank in 2017/18.
Started its operations as a non-banking finance company in 2005, converted to a small finance bank in early 2017.
It uses Financial Software and Systems’ (FSS) end-to-end payments solution.
Established as a microfinance entity in 2009, converted to a small finance bank in 2017.
The bank uses Intellect Design Arena’s LaserPanacea for core banking processing and ACI Worldwide’s UP Retail Payments solution for payments, hosted by AGS Transact Technologies (AGSTTL).