ZestMoney, the Bengaluru-based fintech startup, is set to cease operations by the end of December, confirmed by the company’s new leadership during a town hall meeting on December 5.
Founded in 2016, ZestMoney boasted a considerable customer base of 17 million, facilitating monthly loan disbursals of ₹400 crore, partnering with 27 lending institutions, 10,000 online brands, and 75,000 offline stores.
The decision to shut down follows unsuccessful attempts to secure further funding or find a buyer.
Following the announcement of the shutdown, numerous consumers have turned to X Platform, complaining about the company’s failure to address their credit score and other concerns. Allegedly, despite assurances, these issues remain unresolved, and credit scores have not been updated as promised.
However, the company has taken notice of the online concerns, prompting the reopening of tickets to address the raised issues.
What went down?
The company, which once had a valuation of $445 million, struggled after burning through $130 million of investor capital in its eight-year run.
Despite efforts by the new management – Mohit Chhajer, Mandar Satpute, and Abhishek Sharma – to revive the sinking ship by raising $5-7 million from investors, including existing backer Quona Capital, the rescue attempts failed to materialize.
The imminent closure follows the departure of ZestMoney’s original co-founders – Lizzie Chapman, Priya Sharma, and Ashish Anantharaman – who resigned earlier in the year after failed acquisition talks with PhonePe, resulting in a 30% reduction in the workforce.
Regarding the appointment of the new team, Chapman previously wrote,
“Over the last few weeks, we have done a lot of thinking about the best path forward for ourselves given where the company is at. And whilst it has been very hard for us to arrive at this conclusion, we have decided that we will step back from our day-to-day operating roles with ZestMoney.”
She further added,
“As we go on to the next chapters of our own journeys, we are confidently passing the baton to Mohit Chhajer, Mandar Satpute and Abhishek Sharma to lead the company into the future. They have all been with us on the journey for a long time, having helped build and scale the company to be the largest digital lending franchise in the country. We have 100 percent belief in ZestMoney’s potential and the 175 incredible ‘Zesties’ who are more than ready to take on the huge opportunity that lies ahead for the company.”
A sinking ship
The startup’s woes stem from increasing losses and a surge in loan defaults, leading to a three-fold rise in losses to INR 398.8 crore in FY22 against INR 125.8 crore in the previous fiscal year. Despite a revenue increase to INR 145 crore in FY22, the mounting losses became unsustainable.
Despite efforts to execute a turnaround strategy, dubbed ‘ZestMoney 2.0’ or ‘ZeMo 2.0,’ the company faced obstacles in successfully implementing this plan. ZestMoney pledged two months of severance payment and outplacement support to the impacted workforce.
Last year, the Reserve Bank of India (RBI) imposed restrictions on non-bank institutions and fintech firms, including certain BNPL services, barring them from loading credit lines into prepaid payment instruments such as wallets and prepaid cards. Additionally, a potential acquisition by UPI provider PhonePe in November 2022 fell through due to valuation disputes, resulting in a prior layoff of 100 ZestMoney employees.
The issues regarding regulatory systems and challenges in executing their revival strategy have ultimately led to ZestMoney’s decision to stop operations, culminating in the conclusion of its journey within the BNPL sector. The demise of ZestMoney is an earmark of the competitive challenges and financial constraints other startups in the domain may also face.
Read more: Is Pivoting Your Business All That Bad?