ZestMoney, an Indian buy now, pay later (BNPL) startup, has decided to cease operations after extensive efforts to secure a buyer ended up in vain.
The Bengaluru-based fintech, recognized for its unique ability to underwrite small loans for first-time internet users, had attracted substantial investments from prominent backers, including Goldman Sachs, PayU, Quona, Zip, Omidyar Network, and Ribbit Capital, according to TechCrunch.
Over its eight-year journey, ZestMoney raised over $130 million, reaching a valuation of $445 million. The startup's distinctive approach involved leveraging alternative data points to assess creditworthiness for consumers lacking traditional credit scores, allowing them to make initial online purchases.
ZestMoney Lays Off 150 Workers
Despite ZestMoney's success in securing investments and building a customer base of 17 million, the startup faced significant challenges, prompting a strategic shift. The founders stepped down in May 2023 after acquisition discussions with fintech giant PhonePe fell through. Subsequently, the reins were handed over to a new leadership team consisting of three individuals who aimed to navigate a new path for the company.
According to a report from Money Control, the new leadership's attempt to execute a turnaround plan, dubbed ZestMoney 2.0 or ZeMo 2.0, faced insurmountable hurdles. The leadership informed employees during a town hall meeting that the company would fully wind down by the end of the month, leading to the termination of approximately 150 jobs.
The development follows the founders' exit and a series of engagements with various investors and fintech giants in recent months to explore potential deals. The ZestMoney shutdown decision underscores the challenges faced by the firm in a competitive market where fintech startups aim to address the credit gap in a country with low credit card penetration.
Once a Promising Fintech
ZestMoney's closure comes as a significant setback for its backers, who had envisioned a pioneering role for the startup in the Indian fintech landscape. The startup's initiative to provide credit access to those without traditional credit scores contributed to its notable success.
According to the company's website, "ZestMoney's unique platform uses mobile technology, digital banking, and artificial intelligence to make life more affordable for millions of Indian consumers by putting customers in touch with our lending partners and managing their credit for them." Moreover, it highlighted that its "innovative technology and work to make affordable digital finance accessible led to their selection as a 2020 Technology Pioneer by the World Economic Forum."
ZestMoney, established by Lizzie Chapman, Priya Sharma, and Ashish Anantharaman in 2016, had 27 lending partners and merchant collaborations with 10,000 online brands and 75,000 offline stores, however, the shifting dynamics of the fintech sector in India have led to its untimely demise. According to Hindustan Times, the Reserve Bank of India banned non-bank institutions and fintech businesses, including numerous 'buy now, pay later' services, from loading credit lines into wallets and prepaid cards last year.
The closure of ZestMoney coincides with another setback for Omidyar Network, as Omidyar-backed Doubtnut recently agreed to a sale for $10 million, a significant drop from its previous valuation and a challenging development for the investment firm.
