Fintech lending startup ZestMoney is set to cease operations, as reported by two sources familiar with the situation. In a recent town hall meeting on Tuesday, ZestMoney management informed employees about the decision to wind down operations and advised them to explore new job opportunities, as the company will only be able to honor salary payments until December 31, according to the sources.
This development follows the departure of ZestMoney founders Lizzie Chapman, Priya Sharma, and Ashish Anantharaman in May. The founders stepped down after unsuccessful acquisition discussions with PhonePe, a buy now, pay later (BNPL) startup. Subsequently, ZestMoney appointed Mohit Chhajer as Vice President of Finance, Mandar Satpute as Chief Banking Officer, and Abhishek Sharma as Senior Vice President and Head of Growth to lead the company.
Since March, approximately 130 ZestMoney employees have transitioned to PhonePe. ZestMoney, which had around 500 employees in December of the previous year, has seen its workforce reduced to around 100 employees.
One source revealed that ZestMoney had been collaborating with Aditya Birla Finance and Hero Fincorp as lending partners. However, Aditya Birla Finance recently decided to terminate its partnership with ZestMoney, citing the Reserve Bank of India’s (RBI) move to increase the risk weight on consumer loans as a major setback for the fintech startup.
An anonymous founder of a non-banking financial company disclosed that ZestMoney’s venture capital investors have been actively seeking buyers for the company in recent months, reaching out to potential acquirers in the market.
Attempts to obtain responses from Mandar Satpute and Aditya Birla Finance regarding the situation have not yielded any replies.
Established in 2015, ZestMoney has secured approximately $140 million in funding from investors such as PayU, Zip, Ribbit Capital, Quona Capital, Xiaomi, Omidyar Network, and Goldman Sachs. While the startup experienced a growth in revenue to ₹145 crore in the fiscal year 2022 from ₹89 crore the previous year, its losses widened to ₹398.8 crore from ₹125.8 crore over the same period.
The closure of ZestMoney highlights the challenges faced by fintech startups in a dynamic and competitive market. The decision to wind down operations comes amid shifts in partnerships, regulatory changes, and the evolving landscape of the financial technology sector. The fate of the company and its employees underscores the broader uncertainties and complexities within the fintech industry, where adaptability and resilience are crucial for sustained success.
