ZestMoney, a “Buy Now Pay Later” (BNPL) startup, has announced its closure due to regulatory uncertainties and an unsuccessful attempt at rejuvenating the business under new management. The decision was shared with employees during a town hall meeting on December 5, and the company will be releasing its remaining 150 employees. A minimal legal and finance team will be retained to oversee the shutdown process.
The startup’s troubles began after its founders stepped down, leaving the company under the control of investors and a new management team. ZestMoney’s prospects further deteriorated when acquisition talks with PhonePe fell through. The company, which was previously valued at $450 million, had attempted a turnaround plan known as ZestMoney 2.0 (ZeMo 2.0), which ultimately failed.
Employees affected by the shutdown will receive two months of severance pay and assistance with finding new employment opportunities.
Established in 2016 by Lizzie Chapman, Priya Sharma, and Ashish Anantharaman, ZestMoney had a substantial customer base of 17 million and facilitated monthly loan disbursements of Rs 400 crore. The company also had partnerships with 27 lending institutions and collaborated with 10,000 online brands and 75,000 offline stores.
The company’s downfall was accelerated by Reserve Bank of India (RBI) regulations issued on June 20, 2022, which restricted non-bank institutions and fintech companies from extending credit lines to Prepaid Payment Instruments (PPI) like wallets and prepaid cards. This regulatory shift negatively impacted several BNPL businesses in India.
In November 2022, ZestMoney was in discussions with PhonePe for acquisition, but the deal collapsed in March due to due diligence concerns. Following the failed acquisition, ZestMoney had already laid off 20% of its workforce as part of a business continuity plan.
ZestMoney’s founders resigned in May, and the company introduced ZestMoney 2.0 in an attempt to revive its fortunes. Despite securing a lifeline loan from PhonePe, the startup’s turnaround efforts ultimately proved unsuccessful, leading to its recent closure announcement.
In September 2022, ZestMoney had raised $50 million from Australian BNPL fintech Zip Co as part of a larger Series C fundraising round involving existing investors like Goldman Sachs, Quona Capital, Xiaomi, and Alteria Capital.
