Learning from Failure: Inside the Closure of a $450 Million Fintech Startup ZestMoney | ZestMoney Business Case Study

ZestMoney, a $450 million fintech company, officially announced on December 5, 2023, that it will shut down all its operations. Readers it is a matter of thought why this happened that a company whose valuation is half a billion dollars gets closed within a year or two. In today’s business case study, we will let you know Why ZestMoney Crashed and which lessons you can learn for your startup.

What is ZestMoney?

ZestMoney is a Bengaluru-based fintech startup founded in 2016 by Lizzie ChapmanPriya Sharma, and Ashish Anantharaman. ZestMoney is a digital lending platform that works on the BNPL model.

What is the BNPL Model?

Buy Now, Pay Later (BNPL) is a payment model allowing consumers to make purchases immediately and pay for them in installments over time without interest, or with interest depending on the service.

BNPL Startups are such startups that give you the option that if you want to buy an iPhone today and you do not have money and no bank is ready to give you a loan, then you can go to the platform of such BNPL Startups and apply for it. You can buy an iPhone and these BNPL startups will make EMI and you can easily pay for it.

3 Reasons Why a $450 Million Fintech Startup ZestMoney shuts down?

1. BNPL startups target people who do not have credit through banks or online applications. This includes youth who want to buy expensive items but they are not creditworthy enough to go to a bank and apply for a loan, so these BNPL startups give money to such people.

Due to targeting the youth segment, all the BNPL startups collapsed because these startups were giving money to people who did not have any income source of their own and hence the NPS (non-performing assets) of these BNPL companies was very high. Because of this, all the startups that worked on the BNPL model including ZestMoney had to suffer huge losses.

2. BNPL is a capital-intensive industry and if you want to build your startup in this industry then you should have a lot of money. ZestMoney, earlier raised a lot of funding from the market and now for the last few months, due to wars all over the world, investors are not ready to invest their money in the market, and due to this reason ZestMoney is not getting funding anymore. Hence this led to financial crises and company had to shut down all its operations.

3. The third reason for the failure of ZestMoney is that its three founders had resigned. This is because the company’s losses were increasing very much and the investors were thinking of selling the company to PhonePe. But when PhonePe found out about the real profit & losses of ZestMoney, they came to know that ZestMoney was deeply in debt and hence at the last moment, PhonePe rejected the acquisition offer of ZestMoney. After this news, these three founders resigned together.

At present in India, making a fintech startup is the most difficult task because of RBI any startup that manipulates its customer, RBI brings new guidelines against them. For example, there is a fintech startup Slice that used to offer credit cards to the youth but RBI comes overnight and tells Slice that your business is illegal and shuts it down. Slice had to close its business worth millions of dollars and today Slice is working in the loan segment.

RBI had also issued many regulations against BNPL Model and due to this ZestMoney had to close its business overnight. More than 150 employees are fired and because of all these actions a $450 million startup is closed.

Reader, if you have learned any valuable lesson from this business case study, please let us know in the comment section. Don’t forget to share this case study.

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FAQs

Who are founders of ZestMoney?

ZestMoney is based out of Bangalore and was founded by Lizzie Chapman, Priya Sharma and Ashish Anantharaman.

What services does ZestMoney provide?

ZestMoney’s platform enables instant approval and disbursal of small ticket loans.

What is ZestMoney?

ZestMoney is a digital platform providing access to instant credit for online purchases.

What is BNPL Model?

BNPL (Buy Now, Pay Later) is a payment model allowing consumers to make purchases and pay for them in installments without interest or with minimal fees.”

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