Companies

Razorpay acquires TERA Finlabs to strengthen SME lending business

Our Bureau Bengaluru | Updated on July 19, 2021

Harshil Mathur, CEO and co-founder (left), with Shashank Kumar, co founder

Comes in the background of Razorpay’s foray into the SME lending space

Fintech unicorn Razorpay has acquired TERA Finlabs, a consumer lending and risk assessment start-up. Launched in 2018, TERA Finlabs is an Indian subsidiary of a UK-based digital lender GAIN Credit.

The acquisition comes in the background of Razorpay’s foray into the SME (small and medium enterprise) lending space in 2019. The fintech company had started Razorpay Capital to solve liquidity and cash-flow challenges of SMEs, by offering instant settlements and business loans.

TERA Finlabs has built customised credit products to make consumer loans benefit both lenders and customers. The core advantage of TERA lies in its AI-based risk management and lending platform. This acquisition will help Razorpay in strengthening its capabilities in credit underwriting, data-driven risk management, and capital solutions.

Harshil Mathur, CEO and co-founder, Razorpay, said, “The team at TERA FinLabs comes with exceptional domain knowledge in credit underwriting and risk management and we see immense value in TERA Finlabs core lending infrastructure capabilities. Together, we are looking forward to addressing newer working capital issues faced by MSMEs."

TERA will bring its entire technology stack, risk management capabilities, and onboarding solutions to create and enable a credit line for Razorpay's merchant network. Razorpay Capital along with TERA Finlab expects to service the credit needs of over 10,000 businesses in India by the next year.

In India, banks are wary of providing business loans to start-ups and new SMEs due to the risks attached to the new revenue models of start0ups. Razorpay Capital aims to provide an accessible lending solution to such underbanked small businesses. Many fintech start-ups like CapitalFloat, LendingKart, Paytm, and MobiKwik have also been targeting this market opportunity. Covid-19 pandemic has drastically impacted small and medium businesses, by shrinking their earnings and pushing them to adapt to a digital-first world.

Pradeep Rathnam, Co-Founder and CEO, TERA Finlabs, said, “In the last 16 months, SMEs have started to show rapid growth with their adoption of digital. And this has created an opportunity for significant disruptions in the lending sector — Embedded Credit is one such innovation that I'm certain will transform this space.”

Founded by Mathur and Shashank Kumar in 2014, Razorpay claims to be witnessing a 40-45 per cent growth, month-on-month, and a $40 billion TPV (Total Payment Volume) currently. Prior to TERA Finlabs, Razorpay acquired Thirdwatch, an Artificial Intelligence-driven company that helps reduce Return-to-Origin (RTO) fraud losses in e-commerce, and Opfin, a payroll management software company.

Published on July 19, 2021

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