ZestMoney, the buy now pay later platform, is set to cease its operations by the end of December, according to an internal communication to its staff. The company, currently employing around 150 individuals, is compelled to take this step as it grapples with financial challenges, despite efforts to revitalize its operations. In a setback earlier this year, ZestMoney faced the departure of its three co-founders, Lizzie Chapman, Priya Sharma, and Ashish Anantharaman, following unsuccessful attempts to secure new funding and finalize an acquisition deal with PhonePe, a digital payment platform.
In a statement released in May, ZestMoney outlined a strategic shift, emphasizing a focus on core digital EMI and personal loan products while discontinuing SaaS and insurance business operations. Over the past six months, the company’s digital EMI product has faced challenges, encountering resistance not only from consumers but also from crucial partners such as payment aggregators, eCommerce platforms, and non-banking financial companies (NBFCs).
Prosus, an investor with a significant 19.4% stake in ZestMoney, wrote off its $38 million investment as the company grappled with its financial downturn. Media reports indicate that ZestMoney terminated over 100 employees during a transitional phase. Despite raising approximately $5-7 million in seed funding in July, the company’s financial struggles persisted, culminating in the decision to shut down.
ZestMoney, which has raised a total of $125 million, including debt financing, experienced a decline following the implementation of new guidelines for Buy Now Pay Later (BNPL) companies by the Reserve Bank of India in June 2022. The regulatory measures prohibited non-bank prepaid instrument issuers from loading instruments with credit lines.
As part of its wind-down strategy, ZestMoney intends to retain a minimal finance and legal team. This team will focus on selling the remaining assets of the business to a suitable buyer and overseeing the closure process. Although it is unlikely to attract interest from major fintech companies, there is speculation that a traditional NBFC might consider acquiring the technology in a potential firesale.
Established in 2015, ZestMoney initially operated as a loan-sourcing platform, facilitating rapid credit disbursal at the point of sale, particularly for online merchants. Collaborations with prominent eCommerce players such as Flipkart, Amazon, Myntra, and Nykaa were key to offering pay-later services. Following the breakdown of acquisition talks with PhonePe, ZestMoney attempted a shift in its business model, offering its technology stack as a white-label solution to other fintech lenders and NBFCs.
ZestMoney’s Loss Surges; Operating Revenue and Expenses Rise
Fintechs Learn from ZestMoney’s Cautionary Tale
Financial technology (fintech) experts suggest that stringent regulations have prompted non-banking financial companies (NBFCs) and banks to reassess their associations with digital lending platforms. The rapid expansion of the personal loans sector through these platforms has raised concerns at the central bank for an extended period. The Reserve Bank of India (RBI) has consistently urged banks and NBFCs to exercise greater responsibility when engaging with digital platforms for lending. Additionally, pressure from civil rights groups has mounted, advocating for the elimination of predatory lending practices and addressing concerns related to recovery harassment.
The recent adjustment in risk weightage by the RBI has further complicated these partnerships. While there were speculations about the potential impact on the Buy Now Pay Later (BNPL) business, particularly for platforms like Paytm, the fintech giant has refuted such claims. However, it is anticipated that fintech companies operating in the realms of small-ticket personal loans and BNPL may encounter significant challenges in the coming months.
The closure of ZestMoney serves as a notable example of how heightened regulations can profoundly disrupt the operations of fintech startups. Numerous fintech ventures have expanded into digital lending in recent years, and the regulatory shifts pose a threat to their continued operations. In August of this year, two major consumer internet giants, Flipkart and Swiggy, announced their foray into lending. While Swiggy ventured into the co-branded credit card segment, Flipkart set its sights on the personal loan business.
Google Pay has also intensified its collaborations for both personal and merchant loans. Another major player, CRED, entered the lending arena with a BNPL product in 2022 and is currently exploring opportunities to expand its lending product offerings. Despite the saturation of the market with various digital lending platforms, the RBI’s decision to elevate risk weights appears to be a preventive measure against potential long-term catastrophes.
Fintech startups are recognizing that regulatory compliance is a fundamental aspect of their sector, and not merely an exception. In some ways, startups are acknowledging that merely activating digital lending channels may not suffice. In this context, the case of ZestMoney serves as a cautionary tale for the broader fintech ecosystem.
The COVID-19 lockdown brought a dynamic shift in how consumers interact with businesses. Along with this, it saw a huge increase in digital adoption and more people are online than ever before. With e-payments in full swing, it gave online retailers the option to integrate their e-commerce platform with BNPL service companies.
While shopping online, most of you would have come across websites that allow Buy Now Pay Later (BNPL) service while shopping on their website. However, with a sense of scepticism about online banking, we never quite reached out to find out what it all meant.
As online stores are gradually becoming more aware of their customer’s needs and requirements, they are simultaneously coming up with customer-friendly payment solutions. All these solutions are continuously being integrated with e-commerce platforms.
In addition, BNPL service companies and traditional banks have entered into the system allowing similar payment arrangements. So, what is a BNPL service provider? How does it work? Let’s find out
Once a completely unknown concept, BNPL companies are slowly starting to make their way into the world of e-commerce. A “Buy Now Pay Later” company allows customers to pay for goods and services in a series of instalments rather than paying the full amount upfront.
A few popular examples of such BNPL companies include apps such as AfterPay, Affirm, Laybuy, Klarna, and others. A BNPL service provider, popularly referred to as BNPL apps are easy to use and generally has low-interest rates and high credit limits allowing customers to make common purchases with ease.
BNPL service providers develop and create an app-based form of payment that can be used for both in-store and online payments. The BNPL model is relatively similar to a credit card as BNPL apps allow users to pay for items in a series of instalments over time.
In simple words, a BNPLis a micro-credit option that allows you to shop online and pay off the amount in either days or weeks with little or no interest whatsoever. The rise in BNPL services has filled in a huge gap brought about by the pandemic. Apart from the e-commerce platform, BNPL service options can now be found on food delivery, travel booking, grocery shopping and other relevant platforms as well.
How Do BNPL Service Providers Contribute to E-commerce?
Not just an e-commerce platform, BNPL Service App can also be used for in-store payments. Every time a consumer buys a product using the BNPL Seva App, the seller (merchant) gets the full payment instantly. Meanwhile, the customer can pay the fee in a series of instalments over time.
Moreover, these BNPL applications charge no interestfor customers that stick to their payment deadline. The process of using a BNPL app is simple. Approvals are straightforward and BNPL Company can run a quick and easy credit check that will not affect your credit score.
Top 11 BNPL Product Categories
BNPL service applications not only benefit the customer but also have several advantages for retailers and online store owners. There are several reasons why an online store owner chooses to integrate a BNPL service into its e-commerce platform. Such benefits are
Makes it easy for merchants to sell to a particular of customers who use a BNPL service regularly
Offers customers the ability to buy an item even when they don’t have the full amount upfront.
Stay on top of the market competition or try to get an edge over the market by matching the customer experience offered by other market players.
Helps improve and increase consumer spending by enabling customers to make larger purchases without requiring a credit card.
This opens up another market segment comprising a young audience that has a higher shopping frequency.
Recently, BNPL companies have started to market various brands they work with by mailing vouchers and other exciting offers directly to their customers either via email, newspapers and others. The primary intent behind this isn’t to attract new customers, but to increase the purchasing frequency of the existing ones.
Top 10 Best BNPL Service Providers
The market is highly dynamic in the 21st century. So, if you are a store owner or an e-commerce website, you must be aware of the market trends to better serve your customers and create a completely satisfactory user experience.
Along with this, you need to pay due attention to the payment method used by your customers to pay for their purchases. Being aware of this will only aid in customer satisfaction and help improve the purchase frequency of your existing customers. To achieve this, many e-commerce websites have integrated themselves with BNPL service companies, allowing their customers to have BNPL options as they check out. However, given the abundance of BNPL service companies at your disposal, choosing the right company for your business can be difficult.
To make things easier for you, we have put together the top 10 BNPL service providers that you can opt to go for in 2023.
Simpl
Rating
4/5
Founded
2016
Beneficial to both merchants and customers alike, Simpl was launched in India way back in 2015. Over a period of time, it has grown to become one of the largest players in the BNPL segment in India. Launched as a mobile-first platform, Simpl offers instant approvals that allow a user to pay with a single tap.
Simpl
With Simpl, you have the option to pay later at your convenience. Alternatively, you also have the option to pay in a series of 3 instalments with zero additional charges. Simpl is known to have partnered with 4,500 sellers and merchants across India with a customer base of almost 7 billion.
Pros:
Customisable checkouts option
You can do mobile payments anywhere
Cons:
No free trial provided
Monoova
Rating
4.2/5
Founded
2017
If you are looking to add to the efficiency of your payment workflows, then Moonova’s API integration is exactly what your business needs right now. Thanks to the app’s simple API integration, you get instant account reconciliation, real-time debts and payments, and can assign unique account numbers to the different accounts on your payroll.
Monoova
Moonova uses multi-factor authentication that helps to protect you from online fraud, phishing, and other malicious websites by adding another solid layer of security to all your transactions. The company has recently partnered with Truelayer, a global leader in open banking to ensure smarter, faster, and streamlined data-enabled payments in the market.
The platform’s rock-solid algorithm allows you to conduct the heaviest of transactions with maximum ease. Additionally, the platform offers local support at all times followed by easy-to-use developer tools that you can use within your existing infrastructure
Pros:
Streamlined data-enabled payments
Muti-factor authentication
Maximum stability
Cons:
Needs regular updates and maintenance
PayPal Pay Later
Rating
4.4/5
Founded
2020
Whether you are a small business owner or a company with your own name, PayPal Pay Later is a great option for both. Not only is this great for business owners, but it is also highly convenient as a payment method for BNPL application buyers, allowing them to opt for PayPal Pay Later credit plans.
PayPal Pay Later
The PayPal Pay later credit plan allows users to choose from six to 36 months as their preferred payment plan. Business owners using PayPal for their transactions have direct and automated access to BNPL services. For this, all the business holders need to integrate the BNPL option of PayPal on their website.
Though the app is not compatible with in-store purchases, it integrates with most of the e-commerce platforms present in the market. Finally, PayPal offers a PayPal Purchase Protection Plan that assumes all credit risk and can be used for all PayPal purchases.
Pros:
Low processing fees
PayPal purchase plan
Integrates with most eCommerce platforms
Cons:
Not available for in-store purchases
High late fees
Afterpay
Rating
4.1/5
Founded
2014
Afterpay is a pay-in-four BNPL app that lets users enjoy interest-free instalments with a guaranteed payment of 48 hours to the seller. This BNPL service primarily caters to the needs of Gen Z who are learning to manage money on the go. Smart cards have limits for customers who want to inculcate good spending habits. By 2022, the app has been integrated with around 19 e-commerce websites and can also be used as an API. Operating in 8 countries, the app does not charge any cross-border fees.
Afterpay
Although pricing is not available on the website, popular user reviews indicate that this BNPL service charges between 4% to 6% plus 30 cents per transaction. As a Gen Z shopper, all you need to do is add Afterpay to your digital wallet.
Unlike PayPal, Afterpay is available for both in-store and online purchases. When using Afterpay, you need to put down 25% of the amount in the first phase and then pay the balance in six weeks without any interest charges.
Pros:
48-hour guaranteed payout
Works on the POS system
Integrates with several eCommerce platforms
0% APR
Cons:
Pricing not available
No monthly financing plan present
ZestMoney
Rating
4.2/5
Founded
2015
ZestMoney has rapidly grown to become one of the fastest-growing fintech companies in India. Similar to most BNPL services, ZestMoney allows users to make online purchases and pay back the money in a series of instalments with minimal interest charges.
ZestMoney
The platform’s algorithm integrates mobile technology, digital banking and AI under the same bracket to provide capital access to those who cannot afford loans through traditional mediums. However, unlike the rest, ZestMoney is designed explicitly for heavy purchases such as furniture, flight tickets, or other so on that aren’t covered by other BNPL lending platforms. The app offers interest-free instalment options to select merchants for a period of six to ten months.
Pros:
No-cost EMI on selected platforms
Instant loan approval and disbursal
Flexible EMI options
Cons:
Caters to heavy purchases only
The issue with user privacy
Klarna
Rating
3.5/5
Founded
2005
Klarna was started by the Stockholm School of Economics and is one of the most popular BNPL companies of the 21st century. With Klarna, you shop and you have the flexibility to split your purchases into 4 simple interest-free payments.
Klarna
You can get more time to make payments whenever you need them by simply extending your due date in the app. Once all the payments are done, all you have to do is report it on the app and all the payments will automatically stop. Shop wherever you are and pay directly from a desktop, smartphone or in-store.
Pros:
Available online and in-store
Multiple payment structures
Available in multiple countries
Cons:
Each purchase requires Klarna’s approval
High late fee
Zip
Rating
4.8/5
Founded
2013
Earlier known as Quadpay, Zip provides savvy buyers with greater freedom and essential flexibility to make payments anytime, anywhere using the BNPL platform. Established in Australia in 2013, this BNPL service extends to more than 12 international markets.
Zip
Whether you are a shopper or a merchant, Zip offers transparent and interest-free credit options to all that don’t hassle or disrupt the traditional credit card model. Similar to Klarna, Zip allows you to pay in 4 interest-free instalments. With Zip, you can pay for products directly using your phone or in-store.
Sezzle has now over 3 million active users comprising over 50,000 merchants on its platform. Operating primarily in the US and Canada, Sezzle serves as an alternative payment platform with 4 instalment free payment options spanning over 6 weeks.
Sezzle
As a certified nonprofit B corporation, you have the flexibility to reschedule your payments for up to two weeks at a time. You can shop and pay for your favourite brands both online and in-store using the Sezzle app.
Pros:
Options to Reschedule Payments
Virtual Credit Card Options are available both online and in-store
Cons:
Missed payments result in Account deactivation
Single Payment structure
Affirm
Rating
4.3/5
Founded
2017
Since 2017, Affirm has financed over 17 million purchases and is currently available to more than 30,000 retailers in the US. The company primarily operates in financial lending of instalment loans to their customers for use at every PoS purchase.
Affirm
Depending on your payment plan and eligibility, you can avail of up to 0-30% interest. This US-based BNPL service provider provides you with a flexible, transparent, and more convenient way of helping customers pay overtime as per the payment selection made by the customer.
Pros:
It has email Notifications
It has Customer Portal for financial tracking
Cons:
Very high-interest rates which vary from 10%-30%
It requires a credit check
Upstart
Rating
3.3/5
Founded
2012
The greater the access to affordable credit schemes, the greater the risks and associated costs. However, Upstart is a leading AI lending platform that works with banks and credit unions to help consumers settle their loans with simple payment plans.
Upstart
The process of applying for an UpStart loan is quick and easy. You start by checking eligibility without worrying about whether or not it will affect your credit score. Even if you are not eligible for the amount you requested, they offer some other options. You can then choose different amounts to get estimated APRs.
Pros:
Available In-store and Offline
Active Notification
Cons:
Single Payment Structure
Conclusion
Since the onset of the COVID-19 pandemic, the world has become a bit reluctant to venture out to shop. This has put an emphasis on online shopping in a big way allowing more and more e-commerce platforms to grow and develop every day. Meanwhile, online retailers and e-commerce websites are also making more efforts to match the user experience as per the market competition. For this, most of the e-commerce platforms have implemented a convenient BNPL service.
Without further ado, BNPL services are already making an impact on customers and vendors alike. Looking at the pace at which it is developing, BNPL service companies are all set to become a big element of both in-store as well as online shopping in the years to come. Whether you own a store or an e-commerce website, you need to be updated about the modern payment methods customers use to make their purchases. Doing so will only aid in customer satisfaction and ultimately generate more sales.
FAQ
How much do BNPL providers charge merchants?
Most BNPL retailers do not publicly disclose their merchant fees, but they typically range between 2% and 8% of a customer’s purchase amount.
What are BNPL services?
Buy now Pay later or BNPL is a type of instalment loan. It divides your purchase into multiple equal payments, with the first due at checkout. The remaining payments are billed to your debit or credit card until your purchase is paid in full.
What is Amazon BNPL?
Amazon Monthly Payment is a buy now, pay later (BNPL) option. However, if it isn’t offered on your product or does not meet your payment needs, you could choose a third-party BNPL provider.
Is BNPL a product or service?
BNPL products are credit products, just like any other loan, and will take regular repayments from your bank accounts or credit card.
Is BNPL a payment method?
The buy Now Pay Later (BNPL) scheme is a method of payment which allows consumers to pay for their purchases in short instalment periods without any interest charges or fees.
One of the fastest-growing segments in consumer finance is BNPL (Buy Now Pay Later) firms. A market segment that was worth 33 billion USD in 2019, according to GlobalData, had grown to 120 billion USD by 2021. The business model of BNPL firms emerged from extremely low-interest rates that allowed these firms to raise funds at low cost and offer point-of-sale loans to customers on online shopping websites.
Amid the Covid-19 pandemic, millions of Indians took advantage of eCommerce as online shopping gained a stronghold. Many of these shoppers did not own a credit card and opted for interest-free credit facilities at checkout points. To cater to this rising demand, online platforms and facilitators, who are mostly fintech firms like ZestMoney, LazyPay, Simpl, Pine Labs, and Capital Float, were willing to undertake the risks.
How BNPL startups are disrupting India’s lending space?
The Growth of BNPL
Global Transaction Value of Buy Now, Pay Later in Ecommerce from 2019 to 2026
As the economy slowly opened with restrictions, after the severe Covid-19 lockdown, the oncoming festive season of Diwali saw eCommerce firms like Flipkart and Amazon offer various fintech and credit products to make buying more affordable for their customers. In a bid to widen their customer base, these eCommerce sites made these offers available in Tier 2 and Tier 3 cities as well.
Rajeev Kumar K, Senior Vice President, Market Development, South Asia of Mastercard said – “To encourage sales this festive season and making products more affordable for consumers, merchants are partnering with banks to come up with varied co-branded cards. For instance, Mastercard has a co-branded card with Flipkart and Axis Bank that offers higher reward points, cash backs and other benefits on making card purchases at partner brands.”
Backing this statement was Vikas Bansal, Director of Amazon Pay, who said, “We have definitely ramped up the coverage of our EMI-based credit products to help customers with affordability, keeping their monthly budget in control. Debit-card EMI will be a critical product for Tier 2 and 3 buyers this festive season. We have also increased the down payment cycles from 6 months to 9 months for credit card holders.”
He further went on to say that no-cost EMIs accounted for two-thirds of all EMI purchases on Amazon in 2020. Amazon launched the ‘Pay Later’ product in April of 2020 and by October of that year had already offered more than 10 lakh loans.
By 2021, consumer sentiment seemed to be peaking in light of higher vaccination rates. Indians were shrugging off the impact of a second wave of the coronavirus, which gave companies the confidence to look forward to a bumper festive season in 2021. This optimistic outlook was aided in large part by the flexibility to pay later.
The BNPL market size in 2021 was worth USD 132 billion which is expected to grow at a CAGR of 45% and reach an estimated value of USD 3680 billion by 2030.
Shop Now for Diwali and Pay Later With Flipkart Pay Later
The Buy Now Pay Later concept continued to grow during the festive season of 2021 with multiple eCommerce players seeing disbursals growing by more than 100% in comparison to the festive season of 2020.
LazyPay, the BNPL platform of Prosus-owned payments major PayU, saw a rise of 300% in credit demand, particularly in segments like travel, food & beverages and entertainment.
Anup Agrawal, Business Head at LazyPay said, “We also saw an uptick of 70 per cent in user acquisition in the last two months. Around 60 per cent of the demand is from tier-2 and tier-3 cities, specifically outside of the top 10 cities in India, while the average age of consumers is 26-27 years.”
Prateek Jindal, Co-Founder and Chief Product Officer of Uni, a BNPL startup, said they saw a 100% increase in their transactions, both in volume and value, within the first four months of beginning operations.
He went on to say, “We are currently doing more than Rs 100 crore of monthly disbursals and the peak spend per day in the season was 200 per cent higher than the average.”
Lizzie Chapman, Co-Founder and CEO of the Bengaluru-based startup, ZestMoney, confirmed that the company added 5x new customers in October of 2021 and intended to cross a gross merchandise value of USD 1 billion in the financial year.
The eCommerce giant Flipkart too joined the bandwagon and raised the credit limit of its pay later service from INR 10,000 to INR 70,000 in September 2021, ahead of the festive season. For Flipkart, this move proved hugely successful as they witnessed a 4x increase in the number of transacting customers opting for Flipkart Pay Later.
A company spokesperson said, “India is traditionally a credit averse market and the Coronavirus (Covid-19) pandemic’s impact has increased reliance on credit solutions. Access to credit is a key unsolved need for Indian customers who want to manage their expenses, while also fulfilling their aspirations.”
BharatPe, the fintech unicorn, launched its BNPL platform PostPe and saw a daily average disbursals grow by 2X reaching INR 6 crores within the first two weeks of launch.
Suhail Sameer, CEO of BharatPe said, “The top spends were in categories like cabs, QR transactions at grocery or small retailers as well as electronic purchases- these are ones that witness a spike during the festive season. We expect the numbers to stay steady post festive season as the awareness for the product has grown manifold in the last one month.”
Most of the eCommerce players witnessed an increase in spends on categories like apparel, electronics, grocery, cosmetics, and food delivery.
The payments company, Ezetap integrates BNPL with point-of-sales machines and at the checkout of eCommerce platforms. Ezetap recorded a 73% increase in Pay Later transactions volume and a 136% rise in transaction value during 2021 Diwali. It also recorded a 3% rise in the average ticket size of BNPL transactions.
The trending surge of BNPL shows no signs of slowing and is likely to grow exponentially in the coming months and years. The oncoming Diwali season is showing an increased demand for BNPL as consumers are eager to indulge in high-value shopping with the Pay Later options readily available on most mega eCommerce platforms.
FAQs
What is BNPL?
BNPL, short for Buy Now Pay Later, is a financing option that enables customers to buy a product or service and pay for it later within a specified interest-free period.
What is the best BNPL in India?
Some of the top BNPL apps in India are:
ZestMoney
LazyPay
Amazon Pay Later
Flipkart Pay Later
PostPe
How does BNPL help push eCommerce sales during Diwali?
BNPL plays an important role in pushing eCommerce sales during the Diwali season. It gives customers more control over how and when they want to pay for their products or services. This leads to a better customer experience which in turn helps in increasing sales.
Aditya Sankaran
