Fintech startup ZestMoney to shut down, to lay off remaining 130 employees

The once-promising BNPL firm ZestMoney has met its tragic end, announcing its closure and laying off its remaining 130 employees. This marks a stark downfall for a company that once held the potential to revolutionize India's growing pay-later market, only to be swept away by a confluence of internal struggles and external headwinds.

What went wrong for a company that once boasted a $470 million valuation and a significant user base? The answer, like most cautionary tales, lies in a confluence of internal missteps and external forces.

The Beginning of the End:

ZestMoney's troubles began in June 2023, when the Reserve Bank of India (RBI) tightened the reins on BNPL players by prohibiting non-bank institutions from loading credit lines onto prepaid payment instruments (PPIs) like e-wallets. This move directly impacted ZestMoney's ability to offer its core service – instant credit at checkout. While other BNPL players adapted, ZestMoney seemed to stumble.

PhonePe Pulls the Plug:

Then came the hammer blow: the collapse of the potential PhonePe acquisition. The deal, estimated at $200-300 million, would have been a lifeline for ZestMoney, providing much-needed capital and the backing of a major industry player. However, due diligence concerns on PhonePe's end led to the deal falling through, leaving ZestMoney high and dry.

Co-founders Exit, Leadership Scrambles:

Amidst these external blows, internal cracks began to show. The co-founders, Lizzie Chapman, Priya Sharma, and Ashish Anantharaman, resigned in May 2023, leaving a leadership vacuum. From within the company, Abhishek Sharma (Head of Growth), Mandar Satpute (Chief Banking Officer), and Mohit Chhajer (Finance & FinOps) stepped up, but it was a case of rearranging deck chairs on a sinking ship.

Scraps for Survival, But Too Late:

ZestMoney fought to stay afloat. It raised fresh capital from existing investors in August 2023, but the money couldn't paper over the cracks. PhonePe, despite abandoning the acquisition, acquired some of ZestMoney's tech and talent, adding insult to injury. Ultimately, the combined weight of regulatory hurdles, PhonePe's withdrawal, and internal struggles proved too much.

Lessons Learned, Questions Remain:

ZestMoney's demise offers valuable lessons for the BNPL sector. Adaptability to changing regulations, a clear path to profitability, and prudent financial management are not just buzzwords – they are survival imperatives. But the story doesn't end here. Questions linger:

• Did PhonePe miss out on a diamond in the rough, or did they dodge a bullet?

• Could ZestMoney have navigated the rough waters if it had addressed its internal issues sooner?

• Will the BNPL market learn from ZestMoney's mistakes, or will similar stories unfold?

The answers remain to be seen. But one thing is certain: ZestMoney's fall serves as a stark reminder – even the most promising ventures can crumble under the combined weight of external pressures and internal frailties. As the dust settles, the BNPL landscape will be a little less crowded, but the lessons learned will hopefully pave the way for a more resilient and sustainable future for the industry.

Additional Details:

• ZestMoney had a registered user base of 17 million and partnerships with 85,000 retail touchpoints across India at its peak.

• The company's losses ballooned to Rs 398 crore in FY22, despite a 62% increase in revenue to Rs 145 crore.

• PhonePe had reportedly provided a $18 million loan to ZestMoney during the acquisition talks.