PayU is now acquiring a majority stake in fintech startup PaySense valued at $185 million and plans to merge it with its credit business LazyPay as India’s largest payments processor aggressively expands its financial services offering.
PayU said on Friday that it will invest $200 million — $65 million of which is being immediately invested — into the new venture in the form of equity capital over the next 2 years. PaySense employs about 240 people, has served more than 5.5 million consumers to date.
Prior to today’s announcement, PaySense had raised about $25.6 million from Nexus Venture Partners, and Jungle Ventures, among others. PayU became an investor in the PaySense Series B financing round in 2018. Regulatory filings show that PaySense was valued at around $48.7 million at that time.
This merger will help PayU solidify its presence in the credit business and become one of the largest players, said Siddhartha Jajodia, global head of Credit at PayU, in an interview with TechCrunch. “It’s the largest merger of its kind in India,” he said. The combined entity is valued at $300 million, he said.
PaySense empowers customers to verify long term credit for financing their buys and different expenses. Some of its offerings coincide with those of LazyPay, which principally centers around giving momentary credit to facilitate orders on food delivery platforms, e-commerce websites, and other services. Its credit ranges between $210 and $7,030.
Cumulatively, the two services have disbursed more than $280 million in credit to consumers, said Jajodia. He aims to take this to “a couple of billion dollars” in the next 5 years.
As part of the deal, PaySense and LazyPay will build common and shared technology infrastructure. But at least for the immediate future, LazyPay and PaySense will continue to be offered as separate services to consumers, explained Prashanth Ranganathan, founder, and chief executive of PaySense, in an interview with TechCrunch.
“Over time, as the businesses get closer, we will make a call if the consolidation of brands is required. But for now, we will let consumers direct us,” added Ranganathan, who will serve as the chief executive of the combined entity.
There are nearly a billion debit cards in India today, but only about 20 million people have a credit card.
This means that most Indians don’t have a traditional credit score, so they can’t secure loans and a range of other financial services from banks.
Digital lending is a $1 trillion opportunity over the next four and a half years in India, according to estimates from Boston Consulting Group.
PayU’s Jajodia said PaySense and LazyPay will likely explore building new offerings, such as credit for small and medium businesses. He did not rule out the possibility of getting stakes in more fintech startups in the future. PayU has already invested north of half a billion dollars in its Indian business. Last year, it acquired Wibmo for $70 million.
“At PayU, our ambition is to build financial services using data and technology. Our first two legs have been payments [processing] and credit. We will continue to scale both of these businesses. Even this acquisition was about getting new capabilities and a strong management team. If we find more companies with some unique assets, we may look at them,” he said.
PayU currently leads the payment processing market in India. It competes with RazorPay. In recent years, RazorPay has expanded to serve small businesses and enterprises. In November, it launched corporate credit cards and other services to strengthen its banking play.