Years ago, India made its mark in the tech world by establishing itself as a key hub for business process outsourcing.
With the emergence of embedded finance technology, that legacy has taken a very different turn in fintech, with outsourcing of a very different kind.
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In the most recent development, Lentra, an Indian embedded AI-based finance startup, has raised $60 million in Series B funding, valuing the company at “over $400 million,” according to 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 Citi Ventures, a subsidiary of the New York-based investment banking giant Citigroup, also participating strategically.
This is Citi Ventures’ first investment in an Indian fintech, and the overall round demonstrates how far the fintech and embedded finance ecosystem has progressed in recent years. Lentra, which is profitable, has been expanding at a rapid pace.
In 2019, its first year of operation, it earned $1 million from its “annual consumption rate” — this term refers to the amount of revenue earned by Lentra based on the use of its APIs. This year, the figure has risen to $10 million, and it is expected to reach $100 million by 2024.
The Mumbai-based startup provides digital loan services to commercial banks. Customers include HDFC Bank, Federal Bank, Standard Chartered, and IDFC First Bank.
Since its inception, Lentra has served over 50 clients and processed over 13 billion transactions and $21 billion in loans. Venkatesh claims that the startup grew without hiring a single sales executive until April of this year.
The mission of the company is similar to that of a number of other fintechs that have thrown their hats into the ring to work with — rather than completely upend and disrupt — legacy financial services providers that have found themselves unable to keep up with innovation from faster moving, tech-based competitors.
“We want to help and empower the banks, who are our clients, to lend better, lend completely on a digital platform and improve on all parameters,” said Venkatesh.
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These parameters apply to banks all over the world. Yes, banks want to lend more and be more accessible to more potential borrowers, which is why they are shifting to digital platforms to help them scale and compete with digital-first offerings. But banks have been burned before:
they don’t want to take on a load of bad debt while scaling, so they need better tech to improve how they vet borrowers, as well as a better handle on forecasting what they might expect in terms of returns (and losses).
The four-year-old fintech assists them in this by providing a variety of loan tools. Lentra Lending Cloud, which provides ready-to-use third-party API connectors to a variety of data sources,
as well as a Loan Management System (LMS) and a no-code Business rules engine (BREx) with modules that clients can use right away.
In addition, the startup’s catalog includes the GoNoGo platform, which assists banks in determining whether or not to grant a loan to a customer after receiving their application.
According to Venkatesh, 90% of lending fraud in India occurs through ID proof theft, in which bad actors impersonate someone with a better credit record in order to obtain a loan quickly. Lentra employs artificial intelligence to triangulate data in order to detect potential fraud attempts.
“If you solve ID theft fraud, you minimize the approach or the stance that the bank will have towards a non-performing asset or bad loan,” the founder said.
He claimed that while banks could only reduce the loan process — applying, processing, and approving or denying applications — to six to seven days, Lentra’s technology has reduced that time to a few seconds.
“Our number one target is anyone who’s using Salesforce for loan origination. We go, latch on to them, and then we convert them,” Venkatesh said.
Citi is not only looking to expand its presence in India’s tech ecosystem, but also to use it to further its global expansion.
“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 & APAC Lead Investor for Citi Ventures, in a statement.
“As a global bank, we look forward to Lentra scaling their products and platform internationally.”
According to Venkatesh, Lentra intends to use the funding to continue updating its platform, add new features, and make it more robust and faster.
The startup also intends to expand beyond India and establish its business in other countries, beginning with three Asian economies: Indonesia, the Philippines, and Vietnam. Following the initial expansion, the startup intends to expand beyond Asia and into the United States.
The founder stated that offices in the three new Asian countries will be operational as early as January.
Lentra already has a presence in Singapore, having acquired TheDataTeam, an AI startup with an office in the Lion City, in June of this year.
Venkatesh stated that the Singapore office would serve as a vehicle for the startup to enter the ASEAN economies.
Lentra intends to acquire complementary businesses in addition to improving its offering and expanding its business.
According to the founder, the company’s acquisition plans are focused on three areas: robotic process automation, non-regulated payment systems or solutions, and teams working on statistical modeling or building heuristics models within statistics.
“Lentra is empowering lenders to fuel the dreams of millions with effective financial inclusion and credit decisioning,” said Vishal Gupta, Partner at Bessemer Venture Partners.
“We were really impressed with the combination of their technology prowess and the commercial advantage that Lentra is delivering to their clients.
We look forward to helping them continue to achieve their vision of becoming the most trusted and sought after cloud-native digital lending platform, empowering clients in democratizing credit through accurate decisioning and rapid processing.”
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