Razorpay Acquires Embedded Financing Startup TERA Finlabs

The Indian payments fintech Razorpay said on Monday (July 19) that it has acquired TERA Finlabs, a startup that provides embedded financing solutions for businesses.

“This acquisition of TERA Finlabs is aligned with Razorpay’s strategy of financially supporting as many MSMEs as possible by building core competencies in capital solutions, credit underwriting and data-driven risk management capabilities,” the companies said in a statement. “TERA will provide its entire technology stack, risk management capabilities and onboarding solutions to create and enable a credit line for Razorpay’s merchant network.”

Based in the Indian city of Bengaluru, TERA Finlabs is a subsidiary of GAIN Credit, a digital lender from the U.K. Razorpay Capital, assisted by TERA’s technological capabilities, will be able to serve the credit needs of more than 10,000 Indian businesses by 2022, the companies said. The companies did not disclose the financial details of the transaction.

Razorpay said this marks its third acquisition in less than three years, following Thirdwatch, an artificial intelligence (AI)-driven company that helps reduce return-to-origin fraud losses for eCommerce companies, in 2018, and the 2019 acquisition of Opfin, a payroll management software firm.

According to Razorpay CEO and Co-founder Harshil Mathur, banks in India have been wary of lending to startups and fledgling SMBs due to the risks connected to their revenue models. “Through our lending platform, Razorpay Capital, we have been striving to solve these cash flow challenges, making it easier for businesses to get finance and grow,” Mathur said. “And progressing in that journey, an acquisition such as this fits perfectly with our vision of developing tailor-made, affordable credit solutions for the underbanked small businesses across industries so they can digitally transform and disrupt.”

He added that the TERA team is armed with a wealth of domain knowledge in risk management and credit underwriting, as well as valuable core lending infrastructure capabilities.

Razorpay launched in 2014 with the mission of making online payments available to businesses of all sizes. As PYMNTS reported in April, the company just recorded a $160 million Series E funding round that valued Razorpay at $3 billion, a three-fold increase since October 2020.