In a pivotal turn of events, ZestMoney, a notable player in the Indian “buy now, pay later” (BNPL) sector, has declared its decision to shutter operations. The announcement came to light during a company-wide town hall meeting convened on December 5, where management conveyed the news of the imminent closure to its employees. This strategic move comes as the culmination of a variety of factors, including the company’s struggle to reinvigorate itself under new leadership and the escalating uncertainty posed by regulatory developments.
The ramifications of this decision are far-reaching, extending to the layoff of the remaining 150 employees and marking the denouement of a fintech venture that once held promise in the burgeoning BNPL landscape. Going forward, a select skeletal team will be retained, underscoring the company’s commitment to a systematic and organized cessation of activities.
“The management told the employees that they had to take such a tough decision as the business has not been able to grow,” media reports cite a person familiar with the development. “They were told that they would be given the salary for December and be provided support to find new jobs.” This development is not unexpected, given that the trajectory of ZestMoney took a pivotal turn in May when three co-founders opted to step down. This leadership vacuum had paved the way for a new triumvirate — Abhishek Sharma, Mandar Satupte, and Mohit Chhajer — to assume the mantle of responsibility. However, the leadership transition was not without its challenges, and a notable setback ensued with the failed acquisition talks involving fintech behemoth PhonePe.
The seven-year-old ZestMoney was last valued at nearly $450 million. At its peak, the startup boasted of a customer base of 17 million with loan disbursals of ₹400 crore per month. However, it was also grappled with financial challenges, exacerbated by a funding winter that made securing fresh capital an arduous endeavor for most. The company had initiated layoffs in April, trimming its workforce by 20%, equating to 100 employees. The decision formed part of a broader strategy aimed at ensuring business continuity amidst financial headwinds.
Then, the regulatory environment emerged as a pivotal factor in ZestMoney’s eventual demise. Reserve Bank of India (RBI) issued a significant notification in November 2022, imposing constraints on non-banking institutions and fintech companies from loading credit lines onto Prepaid Payment Instruments (PPI). This regulatory intervention, ostensibly geared toward fortifying the financial landscape, wielded a profound impact on BNPL services in India, contributing to ZestMoney’s struggles and signaling a paradigm shift in the industry.
Read more at thetechportal.com
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