As the business of banking is changing rapidly, neo banking startups have been attracting significant interest from venture capitalists. After Open, Juno and Yelo, Bengaluru-based EpiFi has now secured $13.2 million in a seed round, a significantly high amount for a seed round.
Sequoia Capital, Ribbit Capital, and Hillhouse Capital led the round valuing the less-than-a-year old company at around $50 million.
Aiming to focus on serving millennials in India, EpiFi would be deploying the capital towards building its technology stack, hiring, and for early marketing and consumer adoption, said the company via a press release.
Founded in 2019 by the same team that has built and scaled Tez (now Google Pay) — Sujith Narayanan and Sumit Gwalani, EpiFi offers digital banking services to startups and small and medium enterprises (SMEs) and serves as a savings account that allows them to consolidate their finances in a single view.
With the latest investment, eight-month-old EpiFi has become the second-highest seed-funded startup in the neo banking segment. In November, former Citrus Pay co-founder Jitendra Gupta’s neo banking startup Amica Financial Technologies raised $24 million in its first round of funding from Matrix Partners and Sequoia, among others.
Interestingly, even one of India’s most successful tech entrepreneur Sachin Bansal has been eyeing the digital banking space. But he hasn’t been able to move forward in that direction yet.
Unlike traditional banks that depend on physical branches, neo banks rely upon the internet and other forms of electronic channels for running operations. The new-age banks leverage technology to deliver a superior banking experience.
Venture capitalist started showing an interest in neo banking firms last year in India. Open Financial Technologies raised $30 million in Series B round led by Tiger Global, on the other hand, Juno secured $3 million in a seed funding round led by Sequoia Capital and Polychain Capital in October 2019.
Yelo closed an undisclosed amount from Matrix Partners India, Omidyar Network Flourish VC and Better Capital.
Indian entrepreneurs are taking inspiration from several neo banks across the world that have proven to be successful. They are hoping to replicate similar success in India. For instance, Brazil’s new-age bank Nubank which was launched in 2013 is currently valued at around $10 billion, while another neo bank, Monzo in the UK is valued at around $2.5 billion.
As per the data available, the global neo bank market was worth $18.6 billion in 2018 and is expected to accelerate at a compounded annual growth rate (CAGR) of around 46.5% between 2019 and 2026, generating around USD 394.6 billion by 2026.