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Wednesday, June 19, 2024

Fintech startup Lentra to expand loans-as-a-service for banks with $60M

India’s fintech startup, Lentra, has secured $60 million in funding. Among other things, the company will use the money to expand loans-as-a-service for banks.

Lentra,  an Indian embedded AI-based financial business, has secured $60 million in a Series B round that values the company at “above $400 million,” according to D Venkatesh, the organization’s founder and CEO.

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 behemoth Citigroup, also participating strategically.

This is Citi Ventures’ first investment in an Indian fintech, and the total deal demonstrates how far the fintech and integrated finance ecosystem has progressed in recent years. Lentra, which is profitable, has been expanding at a rapid pace.

This year, the amount has risen to $10 million, and it is expected to reach $100 million by 2024. The Mumbai-based business provides digital lending 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 handled over 13 billion transactions and $21 billion in loans. Banks want to lend more and be more available to more potential borrowers, which is why they are shifting to digital platforms to help them grow and compete with digital-first offers. But banks have been burned before: they don’t want to take on a lot of bad debt while growing, so they need better tech to enhance how they screen borrowers, as well as a better handle on anticipating what they could anticipate in terms of returns (and losses).

The four-year-old fintech assists them accomplish this by providing a number of lending tools:

Lentra Lending Cloud, which provides ready-to-use third-party API interfaces 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 inventory includes the GoNoGo platform, which assists banks in determining whether or not to grant a loan to a consumer after receiving their application.

According to Venkatesh, 90% of lending fraud in India occurs through ID proof theft, in which unscrupulous actors imitate someone with a higher credit record in order to obtain a loan quickly.

Lentra use artificial intelligence to triangulate data in order to detect probable fraud attempts. Venkatesh said that whereas banks could only shorten the loan procedure — applying, processing, and accepting or refusing applications — to six to seven days, Lentra’s technology had cut that time to a few seconds.

Despite the fact that a lot of companies are attempting to make lending easier for banks, Lentra sees Salesforce as one of its main rivals in loan origination.

Everett Leonidas, director & APAC Lead Investor for Citi Ventures, said, “Our primary audience is anyone who uses Salesforce for loan origination. Lentra is our first fintech investment in India, and we are extremely pleased by the team’s capacity to design and expand low-friction software solutions for lenders. According to Venkatesh, Lentra intends to use the funds to continue improving its platform, add new features, and make it more resilient and speedier.”

The firm also intends to grow outside India and develop its business in other countries, beginning with three Asian economies: Indonesia, the Philippines, and Vietnam.

Following the initial growth, the firm intends to expand beyond Asia and into the United States. Offices in the three additional Asian nations will open in January, according to the founder.

Lentra already has a presence in Singapore, having purchased TheDataTeam, an AI firm with an office in the Lion City, in June of this year.

Venkatesh stated that the Singapore office will serve as a vehicle for the firm to enter the ASEAN markets.

Lentra intends to acquire comparable firms in addition to increasing its product and expanding its business. According to Venkatesh, the company’s acquisition intentions are focused on three areas: robotic process automation, non-regulated payment systems or solutions, and teams working on statistical modeling or constructing heuristics models inside statistics.

Vishal Gupta, partner at Bessemer Venture Partners, stated, “With efficient financial inclusion and credit decisioning, Letra is allowing lenders to ignite the ambitions of millions. HDFC Bank is another investor in Letra, albeit it did not participate in the most recent investment round.”

Venkatesh stated that the bank may have invested but did not this time owing to the Reserve Bank of India’s requirement that it not hold more than 10% in unrelated businesses due to the merger with HDFC Group.

Bhavanipratap Rana, SIG’s investment adviser, said, “We are thrilled to be able to assist Lentra, SIG’s first Indian VC investment in 2019. Lentra has expanded 20x since SIG’s investment, demonstrating better metrics on revenue retention and capital efficiency. SIG is looking forward to Lentra’s next phase of growth as it expands to serve worldwide clients.”

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