India initially made a name for itself in the tech world years ago when it cemented its reputation as a major 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 rise of embedded finance technology. In the latest development, Lentra, an Indian embedded AI-based financial startup, has raised $60 million — a Series B that values the startup at “more than $400 million,” D Venkatesh, the startup’s founder and CEO, told TBEN in an interview.
Existing investors Bessemer Venture Partners and Susquehanna International Group (SIG) led the round with strategic participation, also from Citi Ventures, a subsidiary of New York-based investment banking giant Citigroup.
This is Citi Ventures’ first investment in a fintech from India, and that and this round in general underlines how far the fintech and embedded finance ecosystem has progressed in recent years. Lentra, which is profitable, has grown at a very rapid rate. In 2019, the first year of its business, it recorded $1 million of “annual consumption” – this term refers to the amount of revenue Lentra makes from using its APIs. As of this year, that figure is up to $10 million, and is expected to reach $100 million by 2024.
The Mumbai-based startup is partnering with commercial banks to power their digital loan services. HDFC Bank, Federal Bank, Standard Chartered and IDFC First Bank are some of its main clients. In total, Lentra has more than 50 clients and has processed more than 13 billion transactions and $21 billion in loans since its launch. Venkatesh said the startup has achieved all this growth without hiring a single sales executive until April of this year.
The company’s mission is no different from that of a number of other fintechs that have thrown in their hats to partner with – rather than completely overthrow and disrupt – legacy financial services firms, which have been unable to keep up with innovation by moving faster, technology-based competitors.
“We want to help and enable the banks, who are our customers, to lend better, lend entirely on a digital platform and improve on all parameters,” said Venkatesh.
Those parameters are the same for banks around the world. Yes, banks want to lend more and be more accessible to more potential borrowers. That’s why they’re moving to digital platforms to help them scale and compete better with digital-first offerings. But banks have come a long way: they don’t want to take on piles of bad debt as they scale, so they need better technology to improve the way they control borrowers, as well as get a better grip. predict what they might expect in terms of returns (and losses).
The four-year-old fintech helps them with this by means of various loan tools. Lentra Lending Cloud, which provides out-of-the-box third-party API connectors for various data sources, as well as a Loan Management System (LMS) and a no-code Business Rules Engine (BREx) with modules that customers can use right out of the box. The startup also has a platform called GoNoGo in its catalog that helps banks determine whether to provide a loan to a customer once they receive their application.
Venkatesh said that in India, 90% of credit fraud takes place through ID theft, where bad actors impersonate someone with better credit in order to get a loan quickly. Lentra uses AI to triangulate data to identify potential fraud attempts.
“By solving identity theft fraud, you are minimizing the approach or attitude the bank will have towards a non-performing asset or a bad loan,” the founder said.
He claimed that while banks could only shorten the loan process — request, process, and approve or deny — to six to seven days, Lentra’s technology has cut that turnaround time to a few seconds.
While a number of startups are trying to facilitate lending to banks, it’s interesting that Lentra sees Salesforce as one of its biggest competitors when it comes to lending.
“Our main target is anyone who uses Salesforce to make loans. We’ll go, cling to them and then we’ll convert them,” Venkatesh said.
Citi is interested not only in tapping into more of India’s tech ecosystem, but also leveraging 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 & APAC Lead Investor for Citi Ventures, in a statement. . “As a global bank, we look forward to scaling Lentra’s products and platform internationally.”
Venkatesh told TBEN that Lentra plans to use the funding to keep updating the platform, adding new features and making it more robust and faster. The startup will also expand beyond India and establish its operations outside the country, starting with three economies in Asia: Indonesia, the Philippines and Vietnam. After its initial expansion, the startup plans to expand beyond Asia and enter the US
According to the founder, the offices in the three new Asian countries will be operational as early as January.
Lentra has been present in Singapore since it acquired an AI startup TheDataTeam in June this year with an office in the Lion City. Venkatesh said the Singapore office would become the vehicle for the startup to enter the ASEAN economies.
In addition to improving its offerings and expanding the business, Lentra has plans to acquire additional businesses. The founder told TBEN that his acquisition plans focus on three areas: robotic process automation, payment systems or solutions that are not regulated entities, and teams working on statistical modeling or building a heuristics model within statistics.
“Lentra empowers lenders to fuel the dreams of millions with effective financial inclusion and credit decisions,” said Vishal Gupta, Partner at Bessemer Venture Partners. “We were really impressed with the combination of their technological prowess and the commercial advantage Lentra brings to their customers. We look forward to helping them continue to realize their vision of becoming the most trusted and sought-after cloud-native digital lending platform, empowering customers to democratize credit through accurate decision-making and rapid processing.”
Lentra also has HDFC Bank as an investor, although it did not participate in the latest financing round. Venkatesh said the bank could have invested but it didn’t this time because it had to follow the Reserve Bank of India’s condition of holding no more than 10% in unrelated companies due to the merger with the HDFC Group.
The startup currently has Mumbai as the number one market, followed by Delhi, Chennai and Bengaluru. It has a team of 500 people that aims to grow to 800 to support ongoing plans.