Pine Labs Set To Acquire Fintech Start-Up Setu For USD 70 mn
Merchant commerce platform Pine Labs has announced that it is set to buy application programming interface (API) fintech start-up Setu for USD 70 million as the company plans to expand its offerings beyond merchant payments.
This is Pine Labs’ third acquisition in last four months. It picked up a majority stake in payments solution provider Mosambee in April and Mumbai-based online payments start-up Qfix in February.
Apart from point-of-sales (PoS) services, Pine Labs also offers “buy now, pay later,” invoice management, gifting solutions and e-commerce solutions to merchants.
In March, the company raised USD 50 million in funding from Vitruvian Partners, a London-headquartered international investment firm, just a month after raising USD150 million from Alpha Wave Ventures.
Headquartered in Bengaluru, Setu was launched by Sahil Kini and Nikhil Kumar in 2018.
“Setu will make an incredible addition to the Pine Labs platform for a few reasons. Embedded financial services and open banking are going to be the way forward, and the embedded finance market value is expected to exceed USD138 billion by 2026 as APIs are intensifying the competitive fintech landscape,” Pine Labs CEO Amrish Rau said in a statement.
Setu’s offerings include an interface for account aggregators, open network for digital commerce and open credit enablement network frame. It competes with the likes of M2P Fintech, Signzy and Decentro in the API infrastructure business.
While Setu is yet to file its annual financial statement for fiscal 2022, the company reported operating revenues of 33.1 million rupees (USD 423,500) in fiscal 2021, versus zero the previous year.
Currently valued at USD 5 billion, Pine Labs is also contemplating raising USD 500 million in an initial public offering in the US at a valuation of USD 6 billion to USD 7 billion, according to media reports.
According to Invest India, the country is amongst the fastest growing Fintech markets in the world and there are 6,636 FinTech start-ups in India. Indian FinTech industry’s market size was USD 31 Bn in 2021 and is estimated at USD 150 Bn by 2025.
The Fintech transaction value size is set to grow from USD 66 Bn in 2019 to USD 138 Bn in 2023, at a CAGR of 20 per cent.
The Indian Fintech industry ecosystem sees a wide range of subsegments, including Payments, Lending, Wealth Technology (WealthTech), Personal Finance Management, Insurance Technology (InsurTech), Regulation Technology (RegTech) and others.
The Fintech sector in India has seen a funding of USD 8.53 Bn (in 278 deals) in FY22.
As of March 2022, India’s Unified Payments Interface (UPI) has seen participation of 313 banks and has recorded 5.4 Bn monthly transactions worth over USD128 Bn.
As of April 2022, India has 16 Fintech companies, which have gained ‘Unicorn Status’ with a valuation of over USD 1 bn.
Major Trends Driving Fintech Revolution In India
- Supply Side Factors
Growth of Fintech in India is driven by various macroeconomic factors, such as enabling government and regulatory initiatives, India’s demographic dividend, increasing national disposable incomes, large unbanked population, improving internet access and smartphone penetration, and a rapidly evolving e-commerce marketplace.
- Demand Side Factors
As the financial services industry is evolving from following a transactions-based approach earlier to adopting a more consumer centric approach, the cutting-edge technology employed by the Fintech space has created a niche for itself by offering tailor-made products according to consumer preferences. India’s fast emerging tech-savvy consumer base led by millennials is leading the adoption of mobile-first products and services. Across various parts of the country, especially in tier-2 and 3 cities and smaller towns, consumers have leapfrogged cards and wire transfers and moved directly to smartphone banking.
- Technological Advancements
The overall financial services market is witnessing a major transition leveraging new and cutting-edge technologies, such as blockchain, AI, ML, and cloud infrastructure. Three key technology factors driving growth of Fintech include a strong talent pool, increasing collaboration between banks and Fintech enterprises, as well as the fast pace of technological innovations on an everyday basis.