BNPL startup ZestMoney to shut down, to let go of remaining 150 employees

At its peak, ZestMoney was valued at over $400 million

Buy now pay later startup ZestMoney will be shutting down amid regulatory uncertainty and a failed attempt to revive its business under a new management.

The management informed employees in a townhall on December 5 that it will be winding down operations and will let go of the remaining 150 employees. It will retain a skeletal legal and finance team to see through the shut down.

The move comes months after its founders stepped down, leaving the firm in the hands of investors and a new management. ZestMoney started unravelling after PhonePe called off acquisition talks. ZestMoney was last valued at $450 million.

The company said its turnaround plan, dubbed ZestMoney 2.0 or ZeMo 2.0 didn't take off.

The firm has promised employees with two months of severance payment and outplacement support. In fact, several ZestMoney employees have added ‘Open to Work’ tags on their LinkedIn page.

“We knew something was happening but we didn't expect they will shut it down. We were promised salary for next month but the situation is very tense. Many have started reaching out for jobs outside,” An employee told Moneycontrol requesting anonymity.

Founded in 2016 by Lizzie Chapman, Priya Sharma and Ashish Anantharaman, ZestMoney had a customer base of 17 million and enables loan disbursals of Rs 400 crore per month. The company also had 27 lending partners and merchant partnerships with 10,000 online brands and 75,000 offline stores.

RBI Norms

On June 20 2022, the RBI issued a notification forbidding operating non-bank institutions or fintech companies, including many of the 'buy now, pay later' services, from loading credit lines onto Prepaid Payment Instruments (PPI) such as wallets and prepaid cards.

This move impacted several buy now pay later businesses in India. US-based BNPL startup Sezzle too shut down its India operations.

In a recent instance, PayU shut down its BNPL card service LazyCard, it said while announcing the company’s financials.

Since then ZestMoney was looking for a buyer.

Background

In November 2022, PhonePe was in talks to acquire lending platform ZestMoney, a move that would have marked the Unified Payments Interface (UPI) leader's foray into digital lending. As per reports, the deal size was pegged at around $200-$300 million. But in March, the Walmart-backed fintech decacorn walked away from the deal citing issues with due diligence, leaving ZestMoney in chaos.

As PhonePe deal did not go through, ZestMoney had laid off around 20 percent of its workforce or 100 employees as the business was working on a business continuity plan. Some employees were also absorbed by PhonePe.

ZestMoney was also given a loan of about $18 million last year by PhonePe, which acted as a ‘lifeline’ for the company, Sameer Nigam, CEO of PhonePe told Moneycontrol, adding that the BNPL platform was on the verge of getting bankrupt when he first met them.

Founders Exit

Founders of ZestMoney Lizzie Chapman, Priya Sharma, and Ashish Anantharaman resigned on May 15 just two months after PhonePe walked away from a deal to acquire the BNPL platform.

The resignation of all three founders Lizzie Chapman, Priya Sharma and Ashish Anantharaman has raised a lot of questions about the cash-strapped ZestMoney's survival.

However, after the founders’ resignation, the firm announced ZestMoney 2.0, where it promised its employees with assured variable pay at the end of the month along with salary hikes.

The firm’s new management had Abhishek Sharma, the head of growth,  Mandar Satupte, chief banking officer and Mohit Chhajer, the vice president of finance and financial operations (FinOps) to lead the firm.

In August ZestMoney's existing investors such as Quona Capital, Omidyar Network India, Flourish Ventures, Zip, and Scarlet Capital had pumped in funds of nearly $5 million to keep the business running.

The company on December 5th informed employees that its turnaround plan, dubbed ZestMoney 2.0 or ZeMo 2.0 didn't take off.

ZestMoney had in September 2022 raised $50 million from Australian BNPL fintech Zip Co. This was part of a larger Series C fundraise which saw participation from existing investors like Goldman Sachs, Quona Capital, Xiaomi and Alteria Capital.