Indian fintech Lentra raises $60 million to expand loans-as-a-service for banks • TechCrunch

India made its name in the technology world years ago when it carved out a reputation as a key hub for business process outsourcing. Now this legacy has taken a completely different turn in fintech with outsourcing of a completely different kind, with the rise of embedded financial technology. In the latest development, Lentra, an Indian embedded AI-based finance startup, has raised $60 million — a Series B that values ​​the startup at “over $400 million,” D Venkatesh, founder and CEO of the startup, told TechCrunch in a 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 this round overall underscores how far the fintech and embedded finance ecosystem has come in recent years. Lentra, which is profitable, has grown very quickly. In 2019, its first year of operation, it recorded $1 million from its “annual consumption rate” – this term refers to the amount of revenue Lentra earns based on the use of its APIs. As of this year, this number is up to $10 million and is projected to reach $100 million in 2024.

The Mumbai-based startup works with commercial banks to run its digital lending services. HDFC Bank, Federal Bank, Standard Chartered and IDFC First Bank are some of the key customers. Overall, Lentra has more than 50 customers and has processed over 13 billion transactions and loans worth $21 billion 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 not unlike that of a number of other fintechs that have thrown their hats in the ring to work with — rather than completely undo and disrupt — legacy financial services providers, which have found themselves unable to keep pace with innovation from faster developing, technology-based competitors.

“We want to help and empower the banks, who are our customers, to lend better, lend completely on a digital platform and improve all parameters,” Venkatesh said.

These parameters are the same for banks worldwide. Yes, banks want to lend more and be more accessible to more potential borrowers – and so are moving to digital platforms to help them scale and better compete against digital-first offerings. But banks have had their feet burned many times already: they don’t want to take on a load of bad debt in the process of scaling, so they need better technology to improve how they vet borrowers, and also to have a better grip on to predict what they can expect to get in return (and loss) as a result.

The four-year-old fintech helps them do this through a range of loan tools. Lentra Lending Cloud, which provides ready-to-use third-party API connections to various data sources, as well as a Loan Management System (LMS) and a no-code Business Rules Engine (BREx) with modules that clients can use out of the box. The start-up also has a platform called GoNoGo in its catalog that helps banks determine whether a loan should be granted to a customer when they receive their application.

Venkatesh said that in India, 90% of lending fraud is through ID theft, where bad actors pretend to be someone with a better credit score to get a loan quickly. Lentra uses artificial intelligence to triangulate data to identify potential fraud attempts.

“If you solve ID theft fraud, you minimize the approach or attitude the bank will have to a non-performing asset or bad loan,” the founder said.

He claimed that while banks had only been able to reduce the loan process – applying, processing and approving or rejecting applications – to between six and seven days, Lentra’s technology has reduced this cycle to a few seconds.

Although a number of startups are trying to facilitate lending for banks, Lentra interestingly sees Salesforce as one of its biggest competitors when it comes to loan origination.

“Our number one target is anyone who uses Salesforce for loan origination. We go, hook them, and then we convert them,” Venkatesh said.

Citi is not only interested in leveraging India’s tech ecosystem more, but leveraging it for its own global growth as well.

“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,” Everett Leonidas, director and APAC Lead Investor for Citi Ventures, said 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 the platform, adding new features and making it more robust and faster. The startup is also set to expand beyond India and establish its operations outside the country, starting with three economies in Asia: Indonesia, the Philippines and Vietnam. After the initial expansion, the startup plans to go beyond Asia and enter the US

Offices in the three new Asian countries will become operational from January, the founder said.

Lentra already has its presence in Singapore since it acquired an AI startup TheDataTeam in June this year which had an office in the Lion City. Venkatesh said the Singapore office would become the vehicle for the startup to enter the ASEAN economies.

Alongside improving the offer and expanding the business, Lentra has plans to buy complementary businesses. The founder told TechCrunch that its 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 heuristic models in statistics.

“Lentra empowers lenders to fuel the dreams of millions with efficient financial inclusion and credit decisions,” said Vishal Gupta, partner at Bessemer Venture Partners. “We were truly impressed by the combination of their technological prowess and the commercial advantage that Lentra delivers 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, providing customers the opportunity to democratize credit through accurate decisions and fast processing.”

Lentra also has HDFC Bank as an investor, although it did not participate in the last funding round. Venkatesh said the bank could have invested but did not this time as it had to comply with the Reserve Bank of India’s condition of not owning more than 10% in unrelated businesses due to merger with HDFC Group.

“We are pleased to support Lentra, which was SIG’s first Indian VC investment in 2019. Since SIG’s investment, Lentra has demonstrated superior earnings retention metrics and grown 20x, while demonstrating strong capital efficiency. SIG is excited about Lentra’s next phase of growth as they embark on serving global customers, says Bhavanipratap Rana, Investment Advisor to SIG.

The startup currently has Mumbai as its number one market, followed by Delhi, Chennai and Bengaluru. It has a team of 500 people which aims to grow to 800 to support the ongoing plans.