India’s push to digital payments in the last three years has seen tens of millions of people get comfortable with exchanging money online for the first time. But most businesses in the country are still offline and relying on traditional ways to engage with their customers. A Bangalore-based startup that is attempting to bring a similar digitization to them just got a nod from high profile investors.

Setu, a two-year-old startup, said on Wednesday that it has raised $15 million in its Series A financing round from Falcon Edge and Lightspeed Venture Partners U.S. Existing investors Lightspeed India Partners and Bharat Inclusion Seed Fund also participated in the round.

Setu is an API infrastructure provider that allows financial institutions such as banks to connect with companies and small businesses that want to provide financial services to their customers.

The idea is to connect small businesses such as a local cable TV operator or a neighborhood store that is already engaging with thousands of people to serve their customers better by offering formal financial services such as credit. Local kirana stores already have a great understanding of their customers and offer them informal credit. Could they work with financial institutions to formalize their services?

Even as India’s mobile payments market has grown exponentially in the last three years — and saw the arrival of companies such as Amazon, Facebook, Google, and emergence of dozens of local players to help people pay digitally — much of the nation’s population still needs access to formal sachet-ized financial products and services.

“Poor product design, high distribution costs, and legacy technology have been barriers to make this happen,” said Nikhil Kumar, co-founder of Setu.

Kumar, and Sahil Kini, the other co-founder, are especially well-suited to tackle this challenge. Kumar previously worked as a fellow at iSPIRT Foundation that built an ecosystem for UPI, an infrastructure developed by a coalition of banks and backed by the Indian government that has amassed over 100 million users and clocks over a billion transactions a month. Kini worked at Aspada Investments.

The startup today offers open APIs across four categories — bills, savings, credit, and payments. Any developer can access its sandbox to build an application and go through a rigorous developer certification program to go live, the startup said. This makes it easy for any company to acquire plug-and-play financial services and become a fintech player.

“We are big believers in Setu’s vision to build infrastructure that enables the 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’re proud to support their journey,” said Bejul Somaia, Managing Partner at Lightspeed India, in a statement.

Setu recently launched Collect, an API bundle designed for developers to build their own custom collections product. For instance, lending collection companies are using Setu to build an omni-channel collections stack for banks and NBFCs. “This API platform is built on top of public infrastructure such as UPI and BBPS by partnering with some of India’s leading banks — Kotak, ICICI, & Axis Bank,” said Kumar.

It is now working on building blocks for digital financial services across FASTag, savings, credit, and data, he said.



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