India initially made its name in the tech world years ago when it earned a reputation as a key hub for business process outsourcing. Now that legacy has taken a very different turn in fintech with outsourcing of a very different kind, with the advent of embedded financial technology. In the latest development, LentraIndian AI-based embedded finance startup has raised $60 million in Series B, valuing the startup at “over $400 million,” said D. Venkatesh, the startup’s founder and CEO, in an interview with TechCrunch.
Existing investors Bessemer Venture Partners and Susquehanna International Group (SIG) led the round with strategic participation from Citi Ventures, a subsidiary of New York-based investment banking giant Citigroup.
This is Citi Ventures’ first fintech investment outside of India, and overall this round highlights how far the fintech ecosystem and embedded finance have come in recent years. Lentra, which is profitable, is growing at a very fast pace. In 2019, its first year of operation, it logged $1 million from its “annual consumption rate” — a term that refers to the amount of revenue Lentra makes based on the use of its APIs. As of this year, that figure is up to $10 million and is expected to reach $100 million in 2024.
The Mumbai-based startup is working with commercial banks to power their digital credit services. HDFC Bank, Federal Bank, Standard Chartered and IDFC First Bank are some of its key clients. Overall, Lentra has more than 50 customers and has processed over 13 billion transactions and $21 billion in loans since its launch. Venkatesh said the startup achieved all this growth without hiring a single sales manager until April this year.
The company’s mission is no different from that of a number of other fintech companies that have thrown their hats into the ring to work with — rather than completely upend and disrupt — legacy financial services providers that have proven unable to keep pace with innovation from faster-growing, technology-based competitors.
“We want to help and enable the banks that are our customers to lend better, lend entirely on a digital platform and improve all the parameters,” Venkatesh said.
These parameters are the same for banks all over the world. Yes, banks want to lend more and be more accessible to more potential borrowers – so they’re moving to digital platforms to help them scale and better compete with digital-first offerings . But banks have already been burned many times: they don’t want to take on a load of bad debt in the scaling process, so they need better technology to improve the way they screen borrowers and also have more a good handle on predicting what they can expect to get in return (and losses) as a result.
The four-year-old fintech helps them do this through various lending tools. Lentra Lending Cloud, which provides ready-to-use third-party API connectors to various data sources, as well as a loan management system (LMS) and business rules engine without code (BREx) with modules that customers can use outside of the box. The startup also has a platform called GoNoGo in its catalog that helps banks determine if a loan should be given to a customer after receiving their application.
Venkatesh said that in India, 90% of loan fraud occurs through identity theft, where bad actors pose as someone with better credit to get a loan quickly. Lentra uses AI to triangulate data to identify potential fraud attempts.
“If you allow ID theft fraud, you minimize the approach or position the bank will have to a non-performing asset or bad credit,” the founder said.
He claims that while banks have been able to reduce the lending process – applying, processing and approving or rejecting applications – to between six and seven days, Lentra’s technology has reduced that turnaround to a few seconds.
While a number of startups are trying to make lending easier for banks, interestingly, Lentra sees Salesforce as one of its biggest competitors when it comes to lending.
“Our number one target is anyone who uses Salesforce to make a loan. We go, intercept them and then convert them,” Venkatesh said.
Citi is not only interested in tapping more of India’s technology ecosystem, but also using it for its own global growth.
“Lentra is our first fintech investment in India and we are very excited about the team’s ability to develop and scale low-friction software solutions for lenders,” said Everett Leonidas, director and lead investor in Asia Pacific for Citi Ventures, in a statement . “As a global bank, we look forward to Lentra scaling its products and platform internationally.”
Venkatesh told TechCrunch that Lentra plans to use the funding to continue updating its platform, adding new features and making it more stable and faster. The startup is also set to expand beyond India and establish its business outside the country, starting with three economies in Asia: Indonesia, the Philippines and Vietnam. After the initial expansion, the startup plans to expand beyond Asia and into the US
The offices in the three new Asian countries will start functioning as early as January, the founder said.
Lentra already has a presence in Singapore since it acquired AI startup TheDataTeam in June this year, which had an office in the Lion City. Venkatesh said the Singapore office will become the startup’s vehicle to tap into ASEAN economies.
Along with improving the offering and expanding the business, Lentra has plans to acquire additional businesses. The founder told TechCrunch that his acquisition plans focus on three areas – automation of robotic processes, payment systems or solutions that are not regulated entities and teams working on statistical modeling or heuristic model building in statistics.
“Lentra empowers lenders to fuel the dreams of millions with efficient financial inclusion and credit decision-making,” said Vishal Gupta, partner at Bessemer Venture Partners. “We were really impressed with the combination of their technological prowess and the commercial advantage that Lentra brings to its customers. We look forward to helping them continue to achieve their vision of becoming the most trusted and sought-after cloud-based digital lending platform, empowering customers to democratize credit through accurate decision-making and fast processing.”
Lentra also has HDFC Bank as an investor, although it did not participate in the latest round of funding. Venkatesh said the bank could have invested but did not this time as it had to follow the Reserve Bank of India’s condition of not holding more than 10% in unrelated entities due to the merger with HDFC Group.
The startup currently has Mumbai as its number one market, followed by Delhi, Chennai and Bengaluru. It has a team of 500, which it aims to grow to 800 to support current plans.