BNPL fintech startup ZestMoney shuts down

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After months of haggard attempts to bring ZestMoney back on track from the dual setbacks the fintech startup suffered from the RBI regulations and PhonePe calling off the acquisition; the Buy Now, Pay Later (BNPL) startup announced that it was shutting down. The closure comes amid failed attempts to revive the business amid regulatory uncertainty.

ZestMoney logo

The ZestMoney management informed employees in a town hall on December 5 that it will be winding down operations and will let go of the remaining 150 employees. It also assured that it would retain a skeletal legal and finance team to see through the shut down. The startup has promised employees two months of severance pay and outplacement support.

While the news comes only months after the founders stepped down, leaving the startup under the guidance of a new management and its investors; the real issue started way back in early 2022 when the RBI forbade non-banks from loaning credit lines into prepaid payment instruments such as e-wallets. Reportedly, since then, Zest Money has been looking for a buyer.

The situation worsened even further for ZestMoney, when PhonePe called off the potential acquisition of ZestMoney for a sum ranging between $200 million and $300 million. PhonePe decided to abandon the deal, citing concerns related to due diligence. Since then, ZestMoney has laid off around 20 percent of its workforce, with many employees being recruited by PhonePe. This brought down ZestMoney’s 500 employee count from last December to around 150 before the aforementioned news.

“We knew something was happening, but we didn’t expect they would shut it down. We were promised a salary for next month, but the situation is very tense. Many have started reaching out for jobs outside,” an anonymous employee told Moneycontrol.

ZestMoney’s founders exit: failure of ZestMoney 2.0

ZestMoney was founded in 2016 by Lizzie Chapman, Priya Sharma, and Ashish Anantharaman. It was last valued at $450 million and has a strong customer base of 17 million. The startup enabled loan disbursals of Rs 400 crore per month. In addition, it also had 27 lending partners and merchant partnerships with 10,000 online brands and 75,000 offline stores.

After the RBI debacle, PhonePe gave ZestMoney a loan of about $18 million last year. There was also a simultaneous talk of acquisition, which inevitably fell through. Sameer Nigam, CEO of PhonePe, relayed that the company was on the verge of bankruptcy when he first met them.

Soon after PhonePe walked away, all three founders, Lizzie Chapman, Priya Sharma, and Ashish Anantharaman, resigned, raising a lot of questions regarding the startup’s future. The new management shifted to Abhishek Sharma, the head of growth; Mandar Satupte, the chief banking officer; and Mohit Chhajer, the vice president of finance and financial operations (FinOps).

To keep the company afloat, the startup announced a turnaround plan with ‘ZestMoney 2.0’ that did not take off despite raising fresh capital from its existing investors, Quona Capital, Omidyar Network India, Flourish Ventures, Zip, and Scarlet Capital, to continue operations.

Evidently, every endeavour to save the company fell through as it announced that it would shut down. According to the report, the company has promised to pay two months of severance payments and outplacement support to the laid-off employees. Many employees have also added ‘Open to Work’ tags to their LinkedIn profiles.

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