Kreditech, the leading technology group for digital consumer credit using machine-learning based underwriting, has closed a EUR 110 million investment from global online payment service provider PayU.

The landmark investment is the largest ever equity investment in a German fintech company and builds on a successful 12-month pilot programme in Poland.

As part of the deal, Kreditech and PayU agree a global partnership to deliver a joint proposition for Point of Sale Finance. The agreement combines PayU’s strong international footprint with Kreditech’s unique technology to bring innovative credit services to underbanked markets around the world. Kreditech will expand its Lending as a Service (LaaS) offering and deliver its unique AI and machine-learning credit underwriting and loan management technology to PayU’s 300,000-strong network of merchants.

The announcement follows a successful pilot programme managed by Kreditech and PayU, offering Polish consumers improved access to credit in a real-time online process. The pilot programme issued more than EUR 10 million in credit.

Through this major growth financing, PayU has acquired a significant minority stake in Kreditech, joining existing prominent fintech investors including JC Flowers, Varde, Blumberg Capital, HPE, Peter Thiel, Rakuten and the World Bank’s IFC.  Additional transaction parameters were not disclosed.

Increased purchase power for online shoppers in emerging markets

The strategic investment is part of PayU’s global plan to build on its payments heritage to become a leading fintech provider in high growth markets. PayU has a strong track record building payments businesses in growth markets, including Eastern Europe, India and Latin America.

Kreditech can reach its full potential and expand into new territories through its partnership with PayU, meeting its vision to improve financial freedom for the underbanked through technology. The agreement will enable retailers in high growth, emerging markets to offer their customers new ways of financing online purchases – conveniently, transparently, and at competitive interest rates.

Kreditech’s and PayU’s non-exclusive partnership is the first such strategic cooperation pact between a payment service provider and a technology driven consumer finance company.

Retailers benefit from increased sales potential

“We are thrilled to offer online point-of-sale finance in markets where the development of consumer credit has been severely constrained by the lack of reliable credit risk assessment. Our credit scoring and underwriting technology allows PayU and its merchant partners to offer a competitive, convenient credit product to their retail customers”, Alexander Graubner-Müller, CEO of Kreditech, explained. “Teaming up with PayU provides underbanked customers new possibilities and supports our mission of providing financial freedom through technology. At the same time, we enable retailers to reach a new customer group and significantly increase sales volume.”

Laurent le Moal, CEO at PayU, says: “We are excited to build a leading innovative online consumer lending player in high growth markets. With our substantial investment we deepen our relationship with the industry-leading management team at Kreditech, and help to bring pioneering machine learning and AI technology to the many high growth markets around the world that need better access to financial services. At PayU we believe in the enormous potential of technology to unlock credit and financial services for underserved populations. In the past 12 months, we have become the leading corporate venture capital investor in FinTech, investing more than EUR 245 million around the world. This latest investment in Kreditech fits perfectly with this vision.”

Kreditech’s Lending as a Service product line is an API-based solution which enables partners to offer tailor-made consumer finance products to their customers build on top of Kreditech’s technology and machine-learning based underwriting. Partners gain access to the complete Kreditech consumer lending value chain including loan application management, credit risk management, know your customer principles (KYC), e-signature, loan refinancing, loan processing and servicing, collections as well as customer service.