Merchant payments and lending platform Pine Labs has acquired fintech infrastructure specialist Setu for $70-75 million to strengthen its diversified online payments and lending offerings ahead of its plans to list in the United States, the company said on June 23.
Founded in 2018 by Nikhil Kumar and Sahil Kini, Setu offers API (application programme interface) integration for fintech players to work closely with regulated entities like banks, NBFCs and others.
Setu's founders will continue to lead the company and brand name and will function independently, the founders said in an address to the media.
Sahil Kini, co-founder and CEO of Setu said, "As part of this acquisition, Setu will retain its brand identity, business, team and customers. We will get to grow further with access to Pine Labs' large merchant network."
Setu offers open APIs across four categories—data, payments, investments and lending. For Pine Labs, the company's offerings including the interface for Account Aggregator (AA) and plans to grow in the Open Network for Digital Commerce (ONDC) space and Open Credit Enablement Network (OCEN) framework made Setu an attractive bet.
Commenting on the acquisition, B Amrish Rau, CEO of Pine Labs said, "I am looking at this acquisition as a completion between an online payment stack and an embedded fintech stack. Both those coming together make it extremely powerful."
"The engineering, product development, ecosystem building, will continue to remain independent. We see a lot of synergy from a distribution standpoint," Rau added.
Rau did not comment on the company's timeline for its US listing.
Over the past year, Pine Labs has adopted an omnichannel approach and is expanding its geographical presence.
The company’s core payment offering is point of sale (PoS) machines for offline payments, but the firm also forayed into online payments with the launch of its payment gateway platform Plural in October 2021.
Pine Labs is also expanding its Buy Now Pay Later (BNPL) offering in Southeast Asia and it entered the consumer payments space with the acquisition of Fave in April 2021.
Rau said that the offline PoS business now contributes less than 40 percent to the company's revenues while the rest comes from new businesses.
The company's payment gateway Plural is expected to make the offline-to-online transition easier for Pine Labs’ merchant base and will help the company retain its merchants for online payments as well as the penetration of merchant digital payments continues to grow in India.
Setu had powered an Equitas Small Finance Bank fixed deposit product on Google Pay last year which was later pulled down after the Reserve Bank of India (RBI) had raised questions on the product.
Nandan Nilekani, Co-founder and Chairman of Infosys Technologies Limited said, "I have seen both Sahil and Nikhil at close quarters earlier, at Aadhaar and UPI. The kind of infra Setu is building will be very important for India in the years to come."
Kini and Kumar were part of building Indiastack and the technology behind Aadhar and the Unified Payments Interface (UPI).
According to multiple sources, UPI leader PhonePe and rival API infra player M2P Fintech too were in talks to acquire Setu, however, the deals did not fructify.
The company has raised a total of over $1.2 billion till date and is now valued at $5-5.5 billion. In 2022 alone, Pine Labs raised $220 million across three rounds from India's largest lender State Bank of India (SBI), Alpha Wave Global and United Kingdom investment firm Vitruvian Partners.
The company acquired a majority stake in payment solution provider Mosambee at a valuation of $100 million and also acquired online payments start-up Qfix Infocomm in 2022.