Lately, Razorpay, announced its purchase of TERA Finlabs, an AI-based risk tech SaaS platform, for an undisclosed amount. TERA Finlabs is a Bengaluru-based startup that implements technology, risk, and capital solutions to facilitate financing solutions for businesses. TERA Finlabs is an Indian subsidiary of GAIN Credit, a UK digital lender launched in 2018.

Amidst the difficult last year, small businesses have struggled to arrange short-term funding to meet expenses, as their lenders have responded cautiously. During the lockdown, Razorpay has launched lending products such as Cash Advance and Credit solutions with instant settlements aiming to help SMEs solve cash flow problems.

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. 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.

TERA Finlabs has been providing customized credit products with the aim to make consumer loans affordable for customers and profitable for lenders. Razorpay Capital along with TERA Finlab’s technology capabilities will be able to service the credit needs of over 10,000 businesses in India by the next year.

“In India, banks are wary of providing business loans to startups and new SMEs due to the risks attached to new revenue models of startups. Through Razorpay Capital, we have been striving to solve these cash flow challenges, making it easier for businesses to get finance and grow. And progressing in that journey, acquisition such as this fits perfectly with our vision of developing tailor-made affordable credit solutions for the underbanked small businesses across industries so that they can digitally transform and disrupt. Together, we are looking forward to addressing newer working capital issues faced by MSMEs and soon create a major dent in the credit space in the next few years,” said, Harshil Mathur, CEO, and Co-Founder, Razorpay.

"MSMEs were an underserved market for a long time. However, in the last 16 months, they have started to show rapid growth with their adoption of digital. And this has created an opportunity for significant disruptions in the lending sector - Embedded Credit is one such innovation that I'm certain will transform this space. There couldn't have been a better time than now for us to join hands with Razorpay and its technological capabilities to support the MSME segment,” said, Pradeep Rathnam, Co-Founder and CEO, TERA Finlabs.

This letters Razorpay’s third acquisition and comes following its foray into the B2B SME lending space with the launch of Razorpay Capital in 2019.

Previous to this, Razorpay acquired Thirdwatch (an Artificial Intelligence-driven company that helps reduce Return-to-Origin (RTO) fraud losses in e-commerce) in 2018 and Opfin (a payroll management software company) in 2019.