Kreditech, the German startup backed by Peter Thiel, Rakuten and the IFC that creates credit ratings and provides finance to people who may not otherwise have credit histories, has raised another round of funding from one of its strategic partners. PayU, the payments company owned by Naspers that is known by some as the “PayPal of emerging markets” — its business is mainly in providing payment services to online merchants — is investing €110 million ($120 million) in Kreditech.
The companies are not officially disclosing Kreditech’s valuation, but sources tell TechCrunch that it’s higher than the previous valuation (which we last estimated was about €300 million) but less than €500 million. PayU’s investment is mostly in equity, and it gives Naspers a minority stake in Kreditech. Kreditech to date has raised €242 million to date, including this latest €110 million injection.
Before this, PayU and Kreditech had already been working together, specifically in Poland, to provide financing options to potential purchasers on sites where PayU was powering payments. As CFO Rene Griemens describes it, services like Kreditech are important in economies where there is little credit card penetration nor existing credit histories, and so therefore limited options for how to pay for items over an extended period when you don’t the money to do so up front.
The service in Poland issued €10 million in credit to users, and now the plan will be to expand this relationship to more markets where PayU operates. The company currently works with over 300,000 merchants in emerging markets in Asia, Central and Eastern Europe, Latin America, the Middle East and Africa, covering a potential footprint of 2.3 billion users.
It’s specifically developing a stronger focus in India, where Naspers — as part of a larger investment strategy in emerging markets — acquired CitrusPay via PayU for $130 million and has made other bets in e-commerce.
PayU now competes against PayTM and others in capitalising on a fast-growing e-commerce market. Offering more financing options as a part of the payment process is one way to help differentiate PayU and make it a more attractive merchant partner. (Notably, Kreditech has recently opened an office in India and is currently hiring to fill it out.)
Giving buyers (whether consumers or businesses) an option to take out financing for larger purchases opens up the prospects for buyers to even consider certain purchases, and reduces the likelihood of…