Forget Wallets, Check out This Serious FinTech Product Built in India: ZestMoney for Instant Credit

Vijay is a middle-class guy who just got his first job after college and wants to buy an iPhone 6 for Rs. 45,000. He obviously doesn’t have enough money to buy it in one shot and he doesn’t have a credit card (like 98% or more people). He can go for a loan but the banks would ask for collaterals/salary statements; banks don’t give money to those who need it the most. What if he went to an e-commerce site and saw a great deal on the phone and wanted to buy it there and then? Do you think he has any options? Well, very soon he will have options. A credit product is coming to your favorite e-commerce sites that is instant, on-demand and can fill the credit card gap in India. ZestMoney provides an on-demand instant credit, an instant digital EMI of sorts. I think it’s one of the most exciting FinTech companies in India this year – one that will revolutionize the way you buy online.

With growing income levels and the burgeoning middle-class, we are seeing unprecedented levels of consumerism in India. And it’s not just about the fancy restaurants that people are going to or shiny new vehicles they are buying but it’s also about the electronic products and lifestyle products they are buying. People are buying more and they are buying online. The aspiration to possess the latest gadgets and lifestyle products is also increasing. Now, instead of buying a low-budget phone, more than half of the population aspires to buy a fancy smartphone. Most of such consumers are salaried employees who don’t have the immediate spending power to fulfill their aspirations and so they love EMIs. For a salaried employee, no matter how much money you make, there’s is a big burden to remain financially healthy, maintain a budget, pay off debt, build an emergency fund, save for retirement and invest. The only option left for them is taking secured or unsecured personal loans or taking credit through credit cards. Loans can take a lot of time to get sanctioned and disbursed. And credit cards have a big problem in this country which is that most of the people don’t have credit cards. Overall we have only 22.74 million credit cards in this country as opposed to 643 million debit cards. Alternative offline credit solutions such as gold-based (collateral) lending have filled some of the latent demand, but the young, urban digital consumer is still largely underserved, especially when it comes to instant purchases. Why can’t you have a loan when you want it, such as at the time of purchase?

It’s good to finally see a deep FinTech startup emerge in India and target e-commerce purchases. ZestMoney wants to revolutionize the online payment experience with instant credit and probably kill the credit card (which is already small numbers). I met the founders of the company and they bring in the relevant experience to the table.

Lizzie Chapman is the Co-founder and CEO at ZestMoney and has previously worked with DBS bank (helped to build India’s first mobile-only bank), Wonga (credit products) and Goldman Sachs.

Priya Sharma is the Co-founder and CFO/COO at ZestMoney. Priya has the experience of working with firms such as Wonga, Deloitte, Merill Lynch and Sapient.

Ashish Anantharaman is the Co-founder and CTO at ZestMoney. He has 19 years experience in the payments industry.

ZestMoney gives wings to people’s aspiration by enabling consumers to finance their online purchases anytime, in a simple and transparent way, without the need for a credit card.

How ZestMoney works:

  1. Shop: Customer notices Zest EMI pricing on product pages, prompting conversion.
  1. Create EMI: Customer selects Zest at the checkout; generates EMI. New Zest customers can sign up at checkout.
  1. Product Ships: Zest verifies account details and confirms the purchase. Zest authorizes settlement with the merchant. Merchant processes order.
  1. Monthly Repayment: Zest services loans directly with the customer.

Zest acts as a third-party payment provider for e-commerce sites, wherein they can provide their customers with digital EMI /virtual credit card option. The following are the benefits provided by the company to e-commerce merchants:

  1. Boost conversions: ZestMoney boosts merchant’s checkout conversion by making shopping on their site and app affordable, smoother and instant with a seamless sign-up process for their customers.
  2. Increase average order size: Splitting a purchase into flexible monthly EMIs makes customers feel good about a bigger basket. Customers are more likely to "upsize" their purchase when ZestMoney financing is available.
  3. Attract customers: Enabling instant checkout financing to customers who may not have access to traditional credit card EMI. ZestMoney EMI appeals to a younger crowd who don't want a credit card or personal loan.
  4. Reduce cash collection cycle: ZestMoney enables immediate settlement to the merchant and removes fraud and credit risk. Zest handles all ongoing communication with the customer, collections and servicing.

ZestMoney provides the option of an upfront settlement, zero customer credit risk and full customer service to its customers. It’s a combination of a payment product and an instant loan product and both of these can help merchants in a big way if done right. They do a calculated risk the first time a new user makes a purchase using their system but the advance analytics based on robust data set makes it feasible. They also make the customer co-pay some amount to reduce the risk further.

ZestMoney works on B2B2C strategy, resulting in low customer acquisition cost.

The company earns revenue from the following ways:

1. Processing fees, interest, late fees and extension fees from customer 2. MDR and subvention from merchant 3. Subvention from manufacturer 4. Integration fees from lenders

The company was founded in 2015 and has received initial investments (seed round) from Ribbit Capital, Omidyar Network, DMI Finance, founder of Billpay, and families behind a few of India's biggest NBFCs. What fundamentally differentiates Zest is their propensity and ability to process and utilize enormous sets of raw data. The company heavily relies on raw data obtained from various sources (including credit bureaus) and uses it to calculate their own metrics to take decisions. The company makes use of credit bureau and other third-party data in its most granular form, rather than the typically less-predictive aggregated scoring approaches (CIBIL score). The majority of their customers are young people who either do not have any financial history so far or have a thin file, which means that the CIBIL score is meaningless for them.

If you are a merchant, you should be talking to them and if you are a consumer, you can hope and pray that your favorite e-commerce companies integrate them soon. As for me, I already checked out their product by using it on online jewelry store Bluestone. You see, this is how to kill two birds in one shot… My wife is happy now. :)