SBM Bank India Looking To Raise Around $75 Mn For Building BaaS Platform

SUMMARY

The subsidiary of the State Bank of Mauritius Group is looking to raise the funds at a pre-money valuation of about $200 Mn

SBM Bank India, which has aggressively worked with fintech and neobanking startups like Razorpay and Slice, sees its partnerships with fintech startups as a key growth pillar

BaaS allows digital banks and other third parties to connect with banks’ systems directly via APIs

SBM Bank India, a subsidiary of the State Bank of Mauritius (SBM) Group, is reportedly looking to raise funds between $50 Mn to $75 Mn to work on its vision of becoming a leading banking-as-a-service (BaaS) provider in India.

As the round hasn’t closed yet, the terms of the deal might change but the funding would be raised at a pre-money valuation of about $200 Mn, reported TechCrunch, citing sources. SBM Bank India wasn’t immediately available to respond to Inc42’s queries on the issue.

It is important to note that SBM Bank India has aggressively worked with fintech and neobanking startups in the country, including Razorpay, Slice, Open, and ZestMoney. Last month, it announced a strategic partnership with Open to launch Asia’s first end-to-end embedded finance platform Zwitch, which would offer a no-code, low-code and full-stack API solution, enabling fintechs to build their own financial products.

SBM Bank India has also worked with the customers of several fintech startups, offering them co-branded cards, powering their neobanks, and more. As per the publication, SBM Bank India sees its “deep partnerships” with fintech startups as a key growth pillar.

The idea behind BaaS is to allow digital banks and other third parties to connect with banks’ systems directly via APIs. This helps non-banks offer core financial services to their customers and also unlock the open banking opportunity, without getting into the trouble of receiving the licence required for offering core banking services.

Yes Bank and RBL Bank pioneered the BaaS segment in India by opening APIs to developers. Currently, major private banks, including HDFC Bank, ICICI Bank, and Kotak Mahindra Bank, offer APIs. Meanwhile, BaaS fintech startups like Zeta, Setu, and Yap are also growing in numbers with an increase in funding, as per a research report by Future Market Insights.

The overall increase in digitisation and hence, digital banking, has resulted in a sharp growth in the BaaS market.

The State Bank of India (SBI) also launched its omni-digital platform called YONO in 2017. Earlier this year, the SBI disclosed its plans to launch the next generation of YONO by creating a digital bank called ‘Only YONO’.

The global BaaS market is expected to reach a size of $12.2 Bn by 2031, clocking a compound annual growth rate of 15.7% between 2021 and 2031.