Naspers-backed payments company PayU has invested €110 million in German fintech company Kreditech which provides consumer credit scores and underwrites transactions. As part of the deal, Kreditech and PayU will develop a joint proposition for Point of Sale (POS) finance. With this deal PayU gets a minority stake in the company but did not reveal further details on the same.

The company added that PayU will be using their technology to bring credit services to underbanked markets around the world. Kreditech will use the funds expand its Lending as a Service (LaaS) offering and offer its AI and machine-learning credit underwriting and loan management technology to PayU’s network of merchants.

Note that PayU and Kreditech ran a pilot programme in Poland and has offered consumers €10 million in credit. Kreditech CEO Alexander Graubner-Müller said services like Kreditech are important in markets where there is a lack of reliable credit risk assessment and people do not have options to pay later.

Other investors in Kreditech include JC Flowers, Varde, Blumberg Capital, HPE, Peter Thiel, Rakuten and the World Bank’s IFC.

Why is this important for India?

In India, PayU is betting big on its deferred payments product and is investing $50 million in LazyPay over the next few years. PayU acquired the product when it bought Citrus Pay for $130 million. Essentially, LazyPay will allow the company to become an underwriter of transactions and charge consumers on a fortnightly basis. Users are selected based on a trust score, based their online transaction purchases. More than 10 million users have been qualified for LazyPay so far and the system is equipped with algorithms that will write off debts in real time.

Kreditech’s expertise will come in handy for LazyPay as well in the Indian market and in-fact, the company is looking to hire a country manager and finance director in Mumbai. TechCrunch points out that Kreditech recently opened an office in India as well.

Note the LazyPay product’s algorithms consider around 80-odd variables for underwriting debts. Meanwhile, Kreditech is looking at a big data play and considers around 20,000 data points to create a financial profile to assess the risk of providing finance to a person.

Image credit: Flickr user Jason Saul under under CC BY 2.0