Bengaluru: IPO-bound digital payment and financial services provider, Pine Labs is in talks to acquire API-based infrastructure company Setu in a cash and equity deal for $70- $100 million, three persons aware of the discussion confirmed to ET.

If the acquisition comes through, Pine Labs will get access to Setu’s Account Aggregator consent framework and technology, helping it improves market time for its planned financial services launch, according to one of the persons cited above.

Setu’s technology stack eliminates the need for financial service providers to make multiple integrations for one feature.

The deal comes at a time when Pine Labs is looking to diversify its offerings from just merchant payments. Last year, the merchant-focussed fintech took its first steps towards consumer offerings with the acquisition of
Singapore-based loyalty payments startup Fave. It also launched a payment gateway, Plural, to help new-age direct-to-consumer (D2C) brands accept digital and credit-linked payments.

“The due-diligence is underway and Setu’s board has also been apprised of the offer from Pine Labs. Currently, they (Pine Labs) have the exclusivity window for about a month,” a person briefed on the matter said.

Last year, the company was looking to consolidate its acquisitions of gift card provider Qwikcilver and Fave on its consumer platform, to offer loyalty-based and ‘buy-now-pay-later’ solutions.

Setu’s technology stack is expected to help Pine Labs overhaul and refine its financial data infrastructure at a time when it is actively eyeing India’s digital lending space.

Mint was first to report on the development on Wednesday evening.

Founded in 2018, Setu provides API infrastructure, which allows banks and other financial institutions to launch financial services on its platform. It also allows companies to break through old modes of loan assessment such as SMS readings, screen scrapings and file uploads and allows service providers to seamlessly collect data through consumer consent.

Setu partners with licensed account aggregators and provides customisable screens for users to register, approve, reject and manage data consent requests.

Setu also owns its own sandbox which allows developers to build their own solutions on top of the technology stack.

“The few large acquisitions by Pine Labs have only been around diversifying into new markets and launching new segments. However, with regulatory changes like tokenisation, the account aggregator framework and the personal data protection bill, it is being forced to think of the technology stack and the consent layer, which may be hard to build later,” said a person who was aware of the discussions.

Setu cofounder Nikhil Kumar declined to comment on the discussions.

To date, Setu has raised a little over $18 million in equity funding. Its competitor M2P Fintech recently announced its $56 million raise, which was led by New York-based private equity firm Insight Partners.

In January, ET had reported, citing sources that Pine Labs had filed for a ‘confidential’
initial public offering (IPO) worth $500 million with the US Securities and Exchange Commission, and was seeking a valuation between $6 billion to $7 billion. The same month the company also raised $20 million from India’s largest lender, State Bank of India.

ET had also reported last month that Falcon Edge was in talks to
invest at least $100 million in Pine Labs

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