ZestMoney raises $50 mn from Zip Co to scale up buy now, pay later offering

Fintech startup ZestMoney has raised $50 million from the leading global buy now, pay later provider Zip Co Limited. This is part of a larger Series C fundraise which will see participation from existing investors.

Zip will acquire a minority shareholding in the company and a board seat as part of the investment. Founded in Australia in 2013, Zip has a presence in 12 markets across five continents, serving more than 7.3 million customers and over 51,000 merchants.

The company plans to deploy the funds to expand the product suite, deepen the transaction network, strengthen its balance sheet capacity and launch new business lines in insurance and savings.

Founded by Lizzie Chapman, Priya Sharma and Ashish Anantharaman in 2015, ZestMoney allows customers to pay for products over time, but use them now. Increasing smartphone penetration, cheapest data plans in the world and boom in online shopping has propelled the demand for pay later offerings in the country.

“We are thrilled to have Zip come onboard for the next phase in our journey of powering affordability in the lives of Indian consumers,” said Lizzie Chapman, CEO and co-founder, ZestMoney. “This is a deep validation of our position as market leader in the Buy Now Pay Later category in India.”

India is also one of the most financially underpenetrated markets in the world. Credit cards have only 3 per cent penetration, have hidden charges and are not accessible to everyone. Around 500 million people use digital payments and need a convenient and transparent payment option.

Chapman said the shift towards pay later solutions is a global phenomenon and represents young digital consumers looking for transparency, honesty and no hidden charges in financial products.

“We believe India will leapfrog traditional products like credit cards, along with many other emerging markets, going straight to digital payment solutions,” said Chapman. "Over the last year, we have seen applications for BNPL (buy now pay later) go up by 5X on our platform. We strongly believe India will emerge as the largest BNPL market in the world over the next 5 years”.

ZestMoney offers the entire spectrum of Buy Now, Pay Later offering from 30 days to 24 months and ticket sizes ranging from Rs 50 to Rs 5 lakh. It is a completely digital omnichannel BNPL player in the country, allowing customers to transact at 10,000 online sites and 75,000 physical stores across the country. It has 11 million registered users.

Larry Diamond, CEO of Zip Co said while buy now, pay later is emerging as a preferred mode of payment globally, in India, it also plays a crucial role in driving access to credit.

“With more people using digital payments and online shopping, ZestMoney can positively impact hundreds of millions of lives in the coming years,” said Diamond.”We have been incredibly impressed with the founders and leadership team and look forward to the next stage of the ZestMoney journey”

The company uses technology across various stages of onboarding customers including risk assessment, fraud detection, affordability, assessment and KYC compliance. All of this has been built and developed in-house. ZestMoney also uses an alternate data model for underwriting, with a bunch of data points like mobile technology, social data, transactions data from merchants and clickstream data apart from standard data from banks. This gives it a distinctive edge in approving new to credit customers.

Being an end to end digital player the company can service demand from the remotest parts of the country. The company has 70 per cent of their customers in Tier II and III markets, majority of whom are accessing formal credit for the first time in their lives. There are several zero-cost pay later offers that customers can choose from.

Smartphones, large appliances, fashion, travel, home decor, Edtech are the largest categories on the platform. Electric bikes, Ayurveda products, and personal care are popular among customers using the Pay Later option.

ZestMoney partners with 25 banks and NBFCs to power Buy Now, Pay Later for consumers across the country.

The company recently secured the Corporate Agent licence from Insurance Regulatory and Development Authority of India (IRDAI) allowing it to offer and enable insurance products to users on its platform.