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Razorpay acquires TERA Finlabs

Fintech start-up Razorpay acquires TERA FinLabs. TERA FinLabs is an Indian subsidiary of a UK-based digital lender, GAIN Credit. The Bengaluru-based start-up provides technology, risk, and capital solutions to enable embedded financing solutions for businesses.

However, the companies did not disclose the actual financial details of the transaction. Thus, we can only make a guess for the valuation of the company. However, Razorpay appears to envisage something big for the future.

Razorpay’s acquisition of Tera FinLabs appears to be in the companies strategy to financially supporting as many MSMEs as possible. The fintech company is building core competencies in capital solutions, credit underwriting, and data-driven risk management capabilities.

TERA will bring its entire technology stack, risk management capabilities, and onboarding solutions to create and enable a credit line for Razor pay’s merchant network. Razorpay Capital is aiming to solve the credit needs of over 10,000 businesses in India by next year. TERA FinLabs’s technology capabilities will help Razorpay to achieve this milestone.

What are the future plans of Razorpay?

Razorpay - Future of Payments

Razorpay had forayed into the business-to-business (B2B) small and medium-sized enterprises (SME) lending space with the launch of Razorpay Capital in 2019.

This transaction is Razorpay’s third acquisition in less than three years. Razorpay’s had already acquired Thirdwatch – an Artificial Intelligence-driven company, in 2018. Thirdwatch helps in the reduction of Return-to-Origin or RTO fraud losses in e-commerce. After Thirdwatch, Razorpay also acquired Opfin – a payroll management software company, in 2019.

Razorpay CEO and co-founder Harshil Mathur said in his statement. Banks in India are wary of providing business loans to start-ups and new SMEs. Because the banks are majorly focusing on the risks attached to new revenue models of start-ups.

Razorpay- thirdwatch

Mathur said that the team at TERA FinLabs has exceptional domain knowledge in credit underwriting and risk management. Moreover, Razorpay sees immense value in TERA Finlabs core lending infrastructure capabilities and the company is focusing on the development of its core products.

Pradeep Rathnam, co-Founder and CEO of TERA Finlabs, thinks that MSMEs were an underserved market for a long time. However, in the last 16 months, the market is showing rapid growth with its adoption of digital technologies. This shift is creating an opportunity for significant disruptions in the lending sector. TERA Finlabs’ robust end-to-end platform will help new entrants to build scalable and profitable credit businesses.

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