Novo develops customizable small business banking platform with an eye on lending

Small business neobank Novo built its platform around the idea that entrepreneurs want a central hub for their small business banking needs, an approach the fintech says has helped its user numbers grow over the past year and a half three times.

Chief executive Michael Rangel said the fintech, which allows users to customize their banking services through an app marketplace, has grown from 60,000 accounts in March 2021 to 180,000 now.

The Miami-based startup launched its marketplace feature last year, which it says provides its users with connections to more than 1,000 apps that help small businesses with everyday tasks, from sending invoices to gaining cash flow insights.

The result, Rangel said, is a small business ecosystem that provides small businesses with a centralized location for a variety of needs.

“Our goal is to redefine the way people think about checking accounts by allowing them to customize and leverage their checking accounts and have it work for them rather than the other way around,” Rangel said.

The company, which raised $35 million from GGV Capital last week, announced a new partnership with LegalZoom on Wednesday to provide Novo clients with entity formation services.

Users who form entities through LegalZoom can get a 20% discount on entity formation, Novo said.

Integrating services for small business customers in one location has helped the company add customers at a time when other small business-focused fintech companies have closed or exited serving the segment.

Enterprise spend management firm Brex announced in june It will no longer serve small business customers, but instead focus on its core customer base of technology startups and large corporations.

Last year, BBVA USA decided to close Its entrepreneur-focused neo-banking subsidiary Azloahead of an $11.6 billion merger with Pittsburgh-based PNC.

The closure hit Novo, which gained 20,000 former Azlo customers in the 2.5 months after the Spanish bank’s announcement.

In response to new users, Novo has expanded its product roadmap with new features including invoicing and budgeting – a service Azlo offers its customers.

“We incorporated all these different adaptations into our products to meet their needs and in the process create the best possible home for Azlo customers, and it worked,” Rangel said. “A lot of them came over and stayed on with Novo, most of them our strongest and best customers.”

The central hub Novo has created for small businesses means the platform has access to key data points. Such insight could help neobanks eventually expand into lending, Rangel said.

“We allow SMEs to connect all their tools to the central hub, the Novo account. By allowing them to do that, we can see all the inflows and outflows, and we’re able to underwrite them better,” Rangel said. “We believe we have access to data that will allow us to extend credit to the right people at the right time.”

The new bank, whose sponsor bank is Middlesex Federal Savings Bank, is piloting a lending program with plans to roll it out more broadly in 2023, Rangel said.

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