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Bengaluru, NFAPost: The country’s leading full-stack financial solutions company Razorpay announced its acquisition of TERA Finlabs, an AI-based risk tech SaaS Platform, for an undisclosed amount.

TERA Finlabs is a Bengaluru-based startup that provides technology, risk, and capital solutions to enable innovative embedded financing solutions for businesses. TERA Finlabs is an Indian subsidiary of GAIN Credit, a leading UK digital lender, which was launched in 2018 to expand its global footprint in digital lending.

This marks Razorpay’s third acquisition and comes following its foray into the B2B SME lending space with the launch of Razorpay Capital in 2019. Razorpay Capital has been solving for liquidity and cash-flow challenges of SMEs, by offering instant settlements and business loans.

TERA Finlabs has been disrupting traditional consumer lending models with customized credit products to make consumer loans affordable for customers and profitable for lenders. What makes TERA truly unique is given its deep experience in risk management, lending operations & governance, the AI-based risk-tech SaaS platform is designed to help new age consumer tech & FinTech companies deploy and scale embedded credit products with positive economics.

Amidst the difficult last year, small businesses have struggled to arrange short-term funding to meet expenses, as their lenders have responded cautiously. Over the last few months, Razorpay has been actively involved in solving the banking and lending problems of businesses by strengthening their fintech and banking infrastructure.

Lending products launched during lockdowns, such as Cash Advance and Credit solutions with instant settlements, have helped SMEs solve cash flow problems. These accessible funds and transparent pricing mechanisms have leveled the playing field for MSMEs.

This acquisition of TERA Finlabs is aligned with Razorpay’s strategy of financially supporting as many MSMEs as possible by building core competencies in capital solutions, credit underwriting, and data-driven risk management capabilities.

TERA will provide its entire technology stack, risk management capabilities, and onboarding solutions to create and enable a credit line for Razorpay’s merchant network. Razorpay believes bringing in disruptive minds from companies such as TERA Finlabs can solve unique business problems in the industry.

Speaking about their third acquisition in less than three years, Razorpay CEO and Co-Founder Harshil Mathur said in India, banks are wary of providing business loans to startups and new SMEs due to the risks attached to new revenue models of startups.

“Through our lending platform, Razorpay Capital, we have been striving to solve these cash flow challenges, making it easier for businesses to get finance and grow. And progressing in that journey, acquisition such as this fits perfectly with our vision of developing tailor-made affordable credit solutions for the underbanked small businesses across industries so that they can digitally transform and disrupt,” said Harshil Mathur.

He also pointed out the fact that the team at TERA FinLabs comes with exceptional domain knowledge in credit underwriting & risk management and Razonpay finds immense value in TERA Finlabs core lending infrastructure capabilities.

“Together, we are looking forward to addressing newer working capital issues faced by MSMEs and soon create a major dent in the credit space in the next few years,” said Harshil Mathur.

TERA Finlabs Cofounder and CEO Pradeep Rathnam said MSMEs were an underserved market for a long time but in the last 16 months, they 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. There couldn’t have been a better time than now for us to join hands with Razorpay and its technological capabilities to support the MSME segment,” said Pradeep Rathnam.

Pradeep Rathnam said the company is are excited that the strengths of Razorpay and TERA Finlabs are now coming together to ensure that small businesses aren’t burdened by the short-term uncertainties. “Our robust end-to-end platform will enable new businesses to build a scalable and profitable credit business,” Pradeep Rathnam.

GAIN Credit Managing Director India Mukund Venkatesh said while the company is sad to see TERA Finlabs leave the GAIN Credit family, this acquisition is a testament to the lending SaaS platform that GAIN Credit built and.

“Most importantly, the team at TERA that maintained a laser focus on deploying solutions that enabled profitable unit economics for “new to credit” customer segments. We are excited for the great things TERA will do as part of the Razorpay Capital team,” said Mukund Venkatesh.

Razorpay Capital along with TERA Finlab’s technology capabilities will be able to service the credit needs of over 10,000 businesses in India by the next year.

Prior to this, Razorpay acquired Thirdwatch (an Artificial Intelligence-driven company that helps reduce Return-to-Origin (RTO) fraud losses in e-commerce) in 2018 and Opfin (a payroll management software company) in 2019. Razorpay has been witnessing a 40-45% growth, month-on-month.

The company has achieved $40 Bn TPV (Total Payment Volume) and aims to further solidify its position as one of India’s largest full-stack fintech companies Razorpay currently powers payments for over 8 Mn businesses including the likes of Facebook, Airtel, Ola, Zomato, Swiggy, Cred, ICICI Prudential among others and is all set to reach 200 million customers by 2021.

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