Bengaluru: Digital payments gateway provider PayU has acquired a controlling stake in Mumbai-based consumer lending platform PaySense and all its assets at a valuation of $185 million. PayU, which is backed by South African internet and media giant Naspers, also said it will merge its existing pre-approved credit platform LazyPay with PaySense.
Additionally, PayU will inject up to $200 million in the newly created entity as equity capital. Around $65 million of the total amount will be immediately invested, while the balance corpus will be infused over the next 24 months to grow its loan book, PayU said.
As a part of the deal, Prashanth Ranganathan, chief executive of PaySense will lead PayU’s credit business in India as the CEO of the new enterprise. Ranganathan will continue to retain a stake in the merged enterprise, while all other investors and shareholders will exit. PaySense’s existing management team will also become part of the PayU’s credit team.
With a sharp uptick in UPI payments, and access to cheaper Internet in India, several digital payments platforms including PayU had branched into alternate credit lending. These products are largely focused on students, salaried employees, and especially consumers who do not possess a credit spending history.
Although, India’s banked population has more than doubled since 2011 to over 80%, credit bureau coverage is still limited. A Boston Consulting Group research shows that India’s digital lending market represents a $1 trillion opportunity over the next five years.
Using consumer data such as bank statements, smartphone data, and even social media data, emerging digital lenders such as LazyPay and PaySense are able to create an alternate credit score to underwrite their borrowers. PayU’s consumer-level data and insights into their purchase behaviour, LazyPay’s credit product combined with PaySense’s strong analytics and risk management capabilities will enable the combined entity to serve customers without a credit history, said a statement from the company.
With a fresh combined entity, PayU said, its digital credit platform will also enable third parties such as banks, non-banking financial companies and alternate lenders to co-lend to consumers.
PaySense currently provides online loans for different purposes including for personal use, vehicle financing, financing for marriages, vacations, and home renovation. It currenrly claims to manage an AUM (assets under management) in excess of Rs. 500 crores. It has over 5.5 million registered customers with loan disbursement of over Rs. 1,100 crore till date.
On the other hand, PayU’s LazyPay provides users with a pre-approved credit line starting at ₹5,000 and above. Users can make their online purchases using the credit line, and settle bills on monthly basis with LazyPay
"This merger is the next step in our journey as we accelerate our vision for credit in India. We’re delighted to welcome Prashanth and his experienced team as we integrate this fast-growing business and build a full-stack digital lending platform aligned with PayU’s overall plan of orchestrating a broader fintech ecosystem in the region," said Siddhartha Jajodia, global head of credit, PayU, in a statement.
“Providing more Indian consumers with access to credit is crucial to helping individuals grow and succeed. PayU is a natural partner for us as we both strive to make finance more simple, accessible and transparent. We’re excited to start bringing our personal loan product to more consumers throughout India and truly democratise credit," added Ranganathan.
Nexus Venture Partners, who is one of the earliest backers of PaySense will exit its investment in the lending startup under the current PayU deal. Nexus had invested $2.3 million in PaySense in a seed round in early 2015, and had also pumped in more money into the startup across two different funding rounds in 2017 and 2018.