ZestMoney, a prominent buy now pay later (BNPL) platform, is set to cease its operations by the end of December, marking a significant development in the Indian fintech sector. The decision comes on the heels of the resignation of the company’s co-founders in May and the subsequent challenges in securing new funding. ZestMoney had also faced setbacks with the collapse of an acquisition deal with digital payment platform PhonePe.
The impact of this decision extends to approximately 150 employees who will be let go as the company grapples with sustaining growth and overcoming financial hurdles. The formal announcement, made internally, assured employees of receiving their December salaries and committed to providing support in their pursuit of new opportunities.
Despite efforts by a new leadership team, which assumed control after the co-founders’ departure, ZestMoney encountered persistent challenges in the dynamic fintech landscape. The inability to raise fresh capital and adapt to the evolving regulatory environment further exacerbated the company’s struggles.
Notably, Prosus, a significant investor in ZestMoney, wrote off its $38 million investment, reflecting the severity of the financial predicament. The closure of ZestMoney adds to a recent trend of shutdowns in the Indian startup ecosystem, with Akudo and Anar also winding up operations due to various challenges.
While ZestMoney managed to secure approximately $7 million in seed funding in July 2023, it appears these funds were insufficient to navigate the sustained financial pressures. Over its operational history, the company had raised around $125 million, encompassing debt financing, with its last notable funding being a Series C round of $58 million in September 2021.
The downfall of ZestMoney gained momentum following the implementation of new guidelines by the Reserve Bank of India in June 2022. These guidelines prohibited non-bank prepaid instrument issuers, including BNPL firms, from loading instruments with credit lines, thereby reshaping the landscape for players in this sector.
In conclusion, ZestMoney’s decision to shut down reflects the challenging environment faced by BNPL platforms, especially in the wake of regulatory changes. This development underscores the importance of adaptability and financial resilience for fintech ventures in navigating the evolving landscape of the Indian financial sector.
