ZestMoney, a prominent Buy Now, Pay Later (BNPL) startup once valued at $450 million, is reportedly shutting down this month and laying off its remaining 150 employees, according to multiple media reports on Tuesday.
The decision has been attributed to regulatory uncertainty and the failure of ZestMoney 2.0 to gain traction under new management.
During a townhall meeting on Tuesday, the management reportedly informed employees about the decision to wind down operations and lay off the remaining 150 employees.
ZestMoney, which had at one point boasted a workforce of 500, faced challenges stemming from regulatory uncertainties and difficulties in implementing its revised strategy under new leadership.
The troubles for ZestMoney began in early 2023 when Walmart-owned fintech firm PhonePe decided to halt its proposed acquisition of the Bengaluru-based startup.
The deal, initially anticipated to be valued between $200 million to $300 million, encountered obstacles during due diligence, with issues such as valuation disagreements and a high default rate (around 10-12%) surfacing.
Founded in 2016 by Lizzie Chapman, Priya Sharma, and Ashish Anantharaman, ZestMoney operated as an EMI and Pay Later network, disbursing funds directly to merchants through its lending partner. This allowed customers to repay the lender in smaller installments over time rather than paying the full purchase amount upfront.
ZestMoney is popular for providing instant digital loans to customers through Nahar Credit, a non-banking financial company (NBFC) acquired by ZestMoney in 2019.
Despite raising approximately $140 million from prominent investors such as PayU, Zip, Ribbit Capital, Quona Capital, Xiaomi, Omidyar Network, and Goldman Sachs, ZestMoney faced challenges.
The startup’s revenue increased to Rs 145 crore in the fiscal year 2022, up from Rs 89 crore in FY21. However, losses surged to Rs 398.8 crore from Rs 125.8 crore a year earlier.
The decision to cease operations highlights the complexities and challenges faced by players in the rapidly evolving BNPL sector, especially in navigating regulatory uncertainties and market dynamics.