Spense Raises $2.8 Mn From Arkam Ventures To Build Secured Lending Infra

For nearly a decade, India’s fintech ecosystem chased the dream of using technology and alternative data to lend to millions of borrowers overlooked by traditional banks, replacing salary slips with digital footprints such as UPI transactions, smartphone usage, among others. 

However, rising delinquencies in the unsecured lending segment have prompted banks to tighten their risk appetite, forcing fintech lenders to slow disbursals.

Against this backdrop, Bengaluru-based fintech infrastructure startup Spense believes the industry’s next phase will look fundamentally different. 

Instead of building better algorithms to predict whether a borrower will repay an unsecured loan, the startup wants to change the starting point altogether: lend against assets first.

To build the credit infrastructure for this, Spense has raised $2.8 Mn (about ₹27Cr) in a seed funding round led by Arkam Ventures, with participation from Razorpay Ventures, GrowthCap Ventures, and Atrium Ventures.

Founded in 2022 by Pawan Kumar and Srinivas Krishnamurthy, Spense enables banks to launch modern asset-backed credit products, including secured credit cards and credit lines, without replacing their existing technology infrastructure. 

The startup claims to have partnered with seven major banks across India, and powers more than 2 Lakh active cards. It also claims to issue over 40,000 cards every month, accounting for nearly 8% of the country’s monthly credit card issuances. 

“We cannot underwrite the next 300 Mn Indians the same way we underwrote the first 150 Mn,” founder Kumar told Inc42.

This philosophy underpins Spense’s latest product — Credit Line on UPI (CLOU), a secured lending infrastructure that enables banks to offer revolving credit lines backed by customer assets such as fixed deposits, mutual funds, insurance policies and other financial holdings. 

Today, CLOU is primarily used for small-ticket, unsecured loans. Spense aims to change that by enabling banks to offer secured, reusable credit lines instead.

Unlike a traditional loan, where borrowers must apply and submit documents each time they need credit, Spense envisions a reusable credit line that functions much like a credit card. Customers can access this credit through a RuPay credit card, a UPI credit line or other payment rails, while the underlying credit remains secured by an asset.

The Economics Of Unsecured Lending Are Breaking Down

The challenge with small-ticket unsecured lending is not only defaults but also the cost of recovering those loans. 

According to Kumar, collecting a defaulted loan can cost lenders about ₹1,000. If the loan itself is worth only ₹2,000 or even ₹10,000, the economics quickly become unattractive, with a single default capable of wiping out the profits from several successful loans. 

Collateral changes this equation. If a customer has already pledged a fixed deposit or another financial asset, the lender’s recovery process becomes significantly simpler. The loan remains secured, collection costs fall and the economics become viable even for smaller ticket sizes.

This approach also aligns with the RBI’s increasingly cautious stance on unsecured consumer lending. While the regulator continues to support financial inclusion, it continues to stress that credit growth cannot come at the expense of asset quality. As borrower stress rises, lenders are increasingly looking for ways to reduce risk without excluding first-time borrowers altogether.

Spense’s broader thesis goes beyond secured lending. It sees secured credit as a way to build borrowers’ credit histories.

The startup estimates that millions of Indians already hold deposits with banks but have never accessed formal credit. Instead of immediately offering unsecured personal loans, it believes banks should first extend secured revolving credit lines backed by customers’ existing financial assets.

If borrowers demonstrate responsible repayment behaviour over six to twelve months, lenders can gradually increase their unsecured credit limits based on that track record. In other words, the collateral becomes less important over time and the borrower’s repayment history becomes the real asset.

Kumar compared this approach to how many immigrants in the US begin building their credit history. They often begin with secured credit cards backed by cash deposits and, after demonstrating consistent repayment behaviour, gradually qualify for higher unsecured credit limits.  

Spense believes a similar journey could help millions of first-time borrowers in India access formal credit more sustainably. 

Why Not Simply Build Better Credit Scores?

The obvious question is: why not simply build better credit-scoring models? After all, dozens of Indian fintech startups are already building alternative underwriting models using bank statements, GST records, UPI transactions and behavioural data.

However, Kumar said that this approach is reaching diminishing returns. His reasoning is that hundreds of companies, including banks, are already trying to solve the same problem using largely the same datasets. If years of experimentation have not consistently cracked underwriting for first-time borrowers, building yet another scoring algorithm is unlikely to fundamentally change the outcome.

Instead, he believes every customer who starts with an asset-backed credit line generates repayment behaviour that did not exist previously. 

Homemakers, retirees, informal workers and small business owners — many of whom remain invisible to conventional credit models — can gradually build measurable credit histories without requiring banks to take immediate unsecured risk. 

According to Kumar, that behavioural data could eventually become more valuable than the collateral itself.  

Whether this thesis succeeds remains to be seen. Asset-backed lending is not new. What Spense is building is the infrastructure that allows secured credit to function like modern digital credit — instant, reusable and seamlessly integrated into everyday payment experiences. 

Edited by Vinaykumar Rai

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