Pine Labs acquires API infra startup Setu

Merchant payment and lending platform Pine Labs on Thursday announced that it has acquired Bengaluru-based API (Application Programming Interface) infrastructure startup Setu to further strengthen its offerings.

The deal is worth around $70 million, according to sources. The latest acquisition news comes amid reports of Pine Labs' initial public offering (IPO) plans in the United States.

Setu’s founders will continue to lead the company and retain the brand entity while its 90-100 workforce will be retained, the founders said during a virtual press conference. 

Founded by Sahil Kini and Nikhil Kumar in 2018, Setu works with Account Aggregator partners (non-banking financial companies) operating under the NBFC-AA license from the Reserve Bank of India.

The startup enables the consolidation of all financial data of users at a single location and allows users to access services quickly. Its APIs are being used across industry verticals including startups, retail enterprises, banks, insurance, and lending companies. Setu's existing and emerging use cases cut across multiple digital ecosystems, from Aadhaar eSign to Bharat Bill Payment System, payment collection integration via WhatsApp, FASTag payment collection, among others.

The firm also runs the open-source initiative D91 Labs to conduct research and help fintech companies in complying with regulatory requirements.

This is the third acquisition announced by Pine Labs this year. The company picked up a majority stake in payments solution provider Mosambee in April 2022 and Mumbai-based online payments startup Qfix in February.

Pine Labs has been expanding its offerings beyond merchant payments, including Buy Now Pay Later (BNPL), invoice management, gifting solutions, and ecommerce solutions.

In 2021, the merchant-focussed fintech took its first steps toward consumer offerings with the acquisition of Singapore-based loyalty payments startup Fave and expanded to the South East Asia market. It also launched a payment gateway, Plural, to help new-age direct-to-consumer (D2C) brands accept digital and credit-linked payments.

The latest partnership will help Pine Labs get access to Setu’s account aggregator framework. Its tech stack will eliminate the need for the company to have multiple integrations for a product or a feature.

The firm is also looking to go public in the US in the near future. As per news reports, the company had deferred its Nasdaq listing process and had hired Goldman Sachs and Morgan Stanley to formalise the process. In 2021, the Sequoia Capital-backed firm raised a total of $600 million from US-based asset management firm Fidelity, Blackrock and others, followed by a $100 million fundraise from US-based Invesco Developing Markets Fund. 

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Commenting on the announcement, B Amrish Rau, CEO, Pine Labs, said, “Embedded financial services and open banking are going to be the way forward. Setu helps its customers, merchants, and brands build beautiful experiences, so consumers can engage with payments and financial services on their terms. We are in the golden phase of digitisation in India, and Setu is a pioneer in supporting innovation on the India stack – their work on UPI and in the account aggregator space is moving the industry forward.” 

The terms of the deal were not disclosed.

"Pine Labs’ network of merchants and issuers coupled with our API integration prowess will help achieve great results in personal finance management, monitoring loans to predict default rates, credit underwriting, and several other areas,” said Sahil Kini, Co-founder and CEO, Setu.