India's push for digital payments in the past three years has made tens of millions of people familiar with online money exchange for the first time. However, most companies in the country are still offline and rely on traditional methods to connect with their customers. A Bangalore-based startup that is trying to achieve similar digitization has just received a nod from well-known investors.
Setu, a two-year startup, announced on Wednesday that it had raised $ 15 million from Falcon Edge and Lightspeed Venture Partners in the United States in its Series A financing round. Existing investors Lightspeed India Partners and Bharat Inclusion Seed Fund also participated in the round.
Setu is an API infrastructure provider that enables financial institutions such as banks to connect with businesses and small businesses that want to offer financial services to their customers.
The idea is to connect small businesses like a local cable television operator or a neighborhood store that is already working with thousands of people to better serve their customers by offering formal financial services such as loans. Local Kirana stores already have a great understanding of their customers and offer them informal loans. Could you work with financial institutions to formalize their services?
Even though the Indian mobile payments market has grown exponentially in the past three years and companies like Amazon, Facebook, Google and dozens of local players have joined to help people make digital payments, a large part of the country's population still needs access on formal factual financial products and services.
"Poor product design, high distribution costs and legacy technology prevented this from happening," said Nikhil Kumar, co-founder of the startup.
Kumar and Sahil Kini, the other co-founders, are particularly good at tackling the challenge. Kumar previously worked as a fellow at the iSPIRT Foundation, which built an ecosystem for UPI, an infrastructure that was developed by a coalition of banks and supported by the Indian government, collecting over 100 million users and more than a billion transactions per month. Kini worked at Aspada Investments.
The startup today offers open APIs in four categories – invoices, savings, loans and payments. Any developer can access their sandbox to build an application and go through a rigorous developer certification program to go live, according to the startup. This makes it easy for any company to purchase plug-and-play financial services and become a fintech player.
“We firmly believe in Setus vision to build an infrastructure that enables large-scale distribution of and access to financial products. Sahil, Nikhil and the Setu team have an exciting roadmap for the future of financial services in India and we are proud to support their journey, ”said Bejul Somaia, Managing Partner at Lightspeed India, in a statement.
Setu recently launched Collect, an API bundle that allows developers to create their own custom collection product. For example, lending collection agencies use Setu to create an omni-channel collection stack for banks and NBFCs. "This API platform is based on public infrastructures such as UPI and BBPS by working with some of India's leading banks – Kotak, ICICI and Axis Bank," said Kumar.
The startup is currently working on building blocks for digital financial services for FASTag, savings, loans and data, he said.