New Blow to Indian Fintech Startups as ZestMoney to Close Doors
ZestMoney, the Bengaluru-based buy now pay later startup that garnered substantial funding and high-profile investors including Goldman Sachs, is set to shut down. The firm’s attempts to find a buyer were fruitless, leading to the decision to wind down operations by the end of the month. ZestMoney, which had a valuation of $450 million, had employed around 150 people and raised over $130 million during its eight-year journey. The news comes as a disappointment for the Indian startup scene, particularly after the founding team departed in May following failed acquisition talks with fintech giant PhonePe.
ZestMoney, once valued at $450 million, is shutting down after failing to find a buyer. The startup’s unique approach of using alternative data points to evaluate credit profiles allowed first-time internet customers in India to access small loans. However, the challenges of the Indian market and the inability to secure a sustainable future ultimately led to the decision to wind down operations. This highlights the competitive nature of the fintech industry and the difficulties startups face in achieving long-term success.
Challenges in the Indian Market and ZestMoney’s Unique Solution
India’s low credit card penetration has created a significant barrier in accessing credit and traditional loans for the majority of the population. ZestMoney sought to bridge this gap by utilizing alternative data points to evaluate the creditworthiness of first-time internet customers, enabling them to make online purchases. With banks disincentivized by the low profitability of small loans, startups like ZestMoney, Axio, and LazyPay emerged to cater to this underserved market. By leveraging alternative credit profiles, these companies aimed to disrupt the financial dominance of established players such as Bajaj Finance.
ZestMoney’s Quest for Sustainability Falls Short
Despite its innovative approach, ZestMoney’s search for sustainability ultimately faltered. Following the founders’ departure, the leadership team raised additional funds from existing investors and embarked on a search for potential deals. Unfortunately, these efforts did not materialize, leading to the inevitable decision to cease operations altogether. The company’s new leadership remained tight-lipped about the circumstances surrounding the shutdown.