ZestMoney raises $20 million in fresh round

Bengaluru-based digital lending startup ZestMoney has raised $20 million in fresh funding led by Washington, DC-headquartered fintech investor Quona Capital, as the consumer lending space in India gains traction with the imminent entry of giants such as Walmart-owned Flipkart.

ZestMoney said it would utilise the capital to broaden its technology focus. The lending startup will also double its headcount of 60 engineers and 20 data scientists in the next twelve months and deepen integration with partner NBFCs and online retailers with whom it offers EMI options to customers.

The funding round also saw participation from Australian fintech investor Reinventure, along with existing backers Ribbit Capital, Omidyar Network and PayU.

“Quona and Reinventure are both specialist fintech venture funds. There’s definitely a lot of momentum in our space right now, with everyone in e-commerce talking about affordability through EMI and we’re just riding off the back of that,” said Lizzie Chapman, co-founder and CEO of ZestMoney.

ZestMoney has raised a total of $42 million including the current round, making it one of the more well-funded players in the consumer lending space. Although other players such as Capital Float and LendingKart exist, they are not purely focused on consumer lending.

While the three giants Flipkart, Amazon and Paytm would someday have their own consumer lending products, the space was large enough for multiple players, Chapman said, adding it could in some ways favour cross-platform players such as ZestMoney.

“The value of ZestMoney to consumers is being accepted everywhere with the same credit limit useable across all e-commerce platforms,” said Chapman. “This would mean every transaction a consumer makes adds up to give them a better credit limit and better pricing, anywhere they want to shop.”

Growing competition, however, could lead to an increase in cash burn for players in this space, especially with the entry of giants. Unlike in payments, where companies use cashbacks to bring about a change in consumer behaviour, consumer lending shouldn’t see such burn, ZestMoney says, but there could be increased spends on customer acquisition through brand building.

“I do think the spend on branding will go up and we’re okay to do that considering we’ve not done much of it. But, definitely, competition will mean raising money will start picking up and you’ll see a lot more deals in the space,” Chapman said.