Fintech unicorn Zeta launches UPI-linked credit-as-a-service for banks

Fintech unicorn Zeta, a provider of banking technology to financial institutions globally, has launched a digital credit-as-a-service product for its enterprise customers, primarily banks.

The product is based on the credit lines on UPI scheme that the Reserve Bank of India rolled out in September to reduce the cost of financial services and allow users to access pre-approved credit through their UPI-linked accounts. 

Zeta, founded by serial entrepreneur Bhavin Turakhia and Ramki Gaddipati, estimates the transaction volume on this scheme to exceed $1 trillion by 2030, and aims to capture about half of this market.

“Banks have pre-approved credit for millions of customers but are unable to distribute loans to them efficiently,” Zeta said in a statement on Friday, adding that credit products that leverage the credit line on UPI scheme would allow “consumers to borrow precisely how much they need, when they need it”.

Zeta is likely to break even in a few quarters, said Gaddipati, global chief technology officer and chief executive for the Asia-Pacific region. 

The company that has so far raised more than $340 million from investors including SoftBank and Mastercard, and was last valued at $1.45 billion when it raised $250 million in May 2021.

Zeta has spent over $360 million in building its global banking platform, the company said in its statement, adding that it has partnered with a dozen banks.

The pricing for Zeta’s new product would depend on the subset of services a bank requires, said Gaddipati. 

“Each contract will take upwards of three years to deliver meaningful revenue to us. So for the next three years, we do not expect credit-as-a-service to generate meaningful revenue for us. However, it would accumulate contracts that represent substantial revenue to be coming in the subsequent years,” he said.

Outside of India, Zeta’s focus would be to extend its products to small and medium-sized banks in the US, Gaddipati said. 

The Bengaluru-headquartered company has a presence in Dubai, the UK, North America, Latin America, Europe and Asia. Zeta’s India business reported a nearly 33% increase in its operating revenue to ₹816.20 crore for FY23, helping it swing to a profit of ₹21.94 crore from a loss of ₹20.7 crore in the year before.