Digital credit platform ZestMoney said on September 22, 2021, that it had raised $50 million as a part of its Series C from Australian Australia-based Buy Now Pay Later (BNPL) Provider Zip Co Limited.
The fintech lender has approvals to raise a total of $100 million, half of which has been announced today. The company’s existing investors include Goldman Sachs, Quona Capital, Xiaomi and Alteria Capital.
Proud to announce that we have raised $50 Mn in our ongoing Series C Round from one of the largest BNPL brands in the world – @Zip_AU.
We are truly excited to have them join our journey of powering affordability in the lives of 300 mn people in India. https://t.co/ezCWV6n0Yi
— ZestMoney (@ZestMoney) September 22, 2021
After this fundraise, Zip will acquire a minority shareholding in the company and have a board seat as part of the investment. Founded in Australia in 2013 and listed on the Australian Securities Exchange (ASX), Zip has a presence in 12 markets across five continents, marks its entry into the Indian market.
It serves more than 7.3 million customers and over 51,000 merchants. A filing by Zip on the ASX website says that the company has also negotiated terms to increase its shareholding over time.
ZestMoney will use the funds to expand its product suite
ZestMoney said it had 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 is a digital omnichannel BNPL player with a merchant network of 10,000 online and 75,000 physical stores. It has a customer base of 11 million, 70 percent of whom are from Tier II and III markets and are first-time credit seekers.
Lizzie Chapman, CEO and Co-founder of ZestMoney, said, “The investment by Zip is a deep validation of our position as a market leader in the Buy Now Pay Later category in India.”
“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,” added Lizzie.
India’s credit card penetration is only three percent, while 500 million Indians use digital payments.
“Over the last year, we have seen applications for BNPL go up by 5X on our platform. We continue to invest in deepening partnerships with our merchant network and hiring the best talent. We strongly believe India will emerge as the largest BNPL market in the world over the next five years,” Chapman added.
BNPL scope in India
The fundraising comes when the Indian market is increasingly moving towards higher adoption of various credit instruments, including BNPL. ZestMoney also acquired a corporate agent insurance license from the Insurance Regulatory and Development Authority of India (IRDAI) in August.
In India, the buy now, pay later (BNPL) flexible payment method that initially started with e-commerce marketplaces has gradually moved into other industry verticals. Food delivery, the travel industry, and online grocery buying are some sectors wherein BNPL providers are experiencing a lot of growth.
The higher purchasing power offered by BNPL in the coronavirus pandemic is driving the sector’s growth.
However, the informal nature of accessing credit is acting as the primary driver behind the rise of the BNPL segment in India. According to the Q2 2021 BNPL Survey, BNPL payment in the country is expected to grow by 72.7 percent on an annual basis to reach US$ 6327.2 million in 2021.
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.”