ZestMoney, a startup specializing in buy now, pay later services, is set to close its operations after unsuccessful attempts to secure a buyer. The Bengaluru-based company, which attracted notable investors such as Goldman Sachs, PayU, Quona, Zip, Omidyar Network, and Ribbit Capital, was unable to sustain its small-ticket loan underwriting model for first-time internet customers.
Having employed approximately 150 people and garnered over $130 million in funding during its eight-year journey, ZestMoney faced a setback when its founders departed in May after acquisition discussions with fintech leader PhonePe fell through. The reins were handed over to a new leadership team, who, despite raising additional funds from existing investors, could not chart a viable path forward.
The decision to wind down the startup was communicated to employees on Tuesday, with the leadership team remaining tight-lipped about the matter. ZestMoney, once valued at $445 million, had distinguished itself among Indian startups by utilizing alternative data points to establish credit profiles for consumers, enabling them to make their inaugural online purchases.
India’s limited credit card penetration and the absence of traditional credit scores for a significant portion of the population have created challenges for banks in assessing creditworthiness for loans. Moreover, the modest returns associated with small loans have dissuaded banks from offering such financial products. In response, ZestMoney, along with other emerging startups like Axio and LazyPay, sought to carve out a niche in a market traditionally dominated by financial behemoth Bajaj Finance. Despite these efforts, the startup’s journey is coming to an end as it prepares to cease operations by the end of the month.
