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The Decline of a Fintech Visionary: The Closure of Goldman Sachs-Backed ZestMoney

Understanding the Rise and Fall of ZestMoney in India's Evolving Fintech Sector


ZestMoney, a buy now, pay later (BNPL) startup once valued at $450 million, has announced its closure, marking a significant turn in the Indian fintech sector. Founded eight years ago, ZestMoney rose to prominence by offering small ticket loans to first-time internet customers, a service that drew attention from high-profile investors like Goldman Sachs. However, despite its innovative approach and substantial backing, ZestMoney is winding down due to several converging factors​​​​.

"ZestMoney's closure after an 8-year journey, leaving 150 employees in transition, is a stark reminder of the volatile nature of fintech startups." - [TechCrunch]

The company's troubles began with the departure of its founders in May 2023, followed by failed acquisition talks with fintech giant PhonePe. Despite efforts from the new leadership to revive the business, the startup could not sustain its operations and decided to shut down by the end of the month. This decision impacts approximately 150 employees, who will receive severance pay and outplacement support​​​​.

ZestMoney's closure highlights the challenges faced by the Indian fintech sector. The Reserve Bank of India's (RBI) regulatory changes in June 2022 significantly impacted non-bank institutions and fintech companies offering BNPL services. These regulatory hurdles, coupled with the breakdown of acquisition talks with PhonePe and the transition in leadership, precipitated ZestMoney's downfall​​.

"Despite initial success and a strong customer base, regulatory challenges and leadership transitions steered ZestMoney to an unfortunate end." - [Dazeinfo]

In its eight years, ZestMoney amassed a customer base of 17 million, facilitating monthly loan disbursals of Rs 400 crore. The startup collaborated with 27 lending partners and established ties with 10,000 online brands and 75,000 offline stores. This extensive network underscores the company's once-strong foothold in the fintech domain​​.

ZestMoney's journey encapsulates the dynamics of the fintech industry. The startup's innovative approach to using alternative data points for building credit profiles enabled consumers without traditional credit scores to make online purchases. This strategy was critical in a market where low credit card penetration and the banks' reluctance to issue small loans left a significant portion of the population financially underserved​​​​.

"ZestMoney's shutdown signifies more than just the end of a startup; it's a major setback for the Indian fintech sector." - [BNN Network]

However, despite earlier successes and significant funding, including a $50 million investment from Australian BNPL fintech Zip Co., ZestMoney faced continuous financial challenges. A final investment of $5 million in August 2023 from existing investors could not sustain the business long-term​​.

ZestMoney's closure is a significant blow to the Indian fintech sector. It underscores the challenges of sustaining innovation amidst regulatory shifts and market uncertainties. The shutdown not only affects the employees and investors but also signals a cautionary tale for emerging fintech startups in India and globally​​​​.


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