With the rise of online shopping and gradual reduction in the heavy discounts offered by e-commerce companies, digital lending has gained momentum in the last few years.
Bengaluru-based ZestMoney founded in 2016 by Lizzie Chapman, Priya Sharma and Ashish Anantharaman, raised an undisclosed sum of money earlier this year from venture debt Alteria Capital. The lending platform that has raised money from Chinese smartphone manufacturer Xiaomi, provides loan to users to be paid in EMIs for online shopping, buying travel tickets or to enroll for online educational courses.
We talked to Lizzie Chapman who moved to India from London in 2011 and started ZestMoney with her co-founders five years later. In this interview with The Passage, she talks about the company’s growth and the lending market in India.
The Passage: What is ZestMoney's focus this year?
Lizzie Chapman: We started our journey in 2016 by bringing virtual credit to India, and providing seamless, instant access to cardless EMIs, and today, we are the biggest online EMI network in the country, but there is still a long way to go.
We estimate that there are still more than 300 million households that do not have access to credit cards or other formal financing option but could afford a small consumer durable loan. Our mission is to include these households into the formal credit ecosystem by using our proprietary AI-based technology to ascertain their credit worthiness, and offer affordable, small-ticket finance to them.
This year, our focus is on expanding our technology across the entire platform, (online and in-store), deepening our partner network and investing in further integrations with partner NBFCs.
We receive about 500,000 applications from users a month and expect that number to grow significantly in 2019. We currently have 800 partner merchants and plan to expand to about 8,000 by the end of this year. Our aspiration is to be one of the most-loved financial brands. When people think EMI, they should think of ZestMoney.
The Passage: How has your growth been in terms of new users and loans sanctioned?
Lizzie Chapman: We are growing at approximately 20% per month. At present, we have over 5 million registered users. Our annual disbursal run rate is Rs 1,500 crores, and we expect this to double by the end of 2019.
The Passage: What is your average loan size? And what is your revenue model?
Lizzie Chapman: Our loan ticket size varies with categories. For electronics, our average ticket size would be about Rs 20,000, and that figure could go as high as Rs 50,000 for ed-tech or healthcare categories. In terms of revenue, we earn money from merchant partners, lender partners and also consumers.
The Passage: Which is your biggest category?
Lizzie Chapman: E-commerce, including electronics, is our biggest category today. Travel, education and medical are categories that are growing very fast.
The Passage: What does Xiaomi bring to the table apart from money?
Lizzie Chapman: Xiaomi and ZestMoney have a strong commercial partnership. We power various financing products for their customers, including mi.com and Mi Home store’s Cardless EMI. We also launched a product with Xiaomi under the brand Mi Credit.
Xiaomi is a great partner because there is a huge overlap in our respective customer bases and they really understand the power of financing, from having used it successfully to grow the market in China. Following our commercial partnership they became a very small shareholder in the company.
The Passage: How do you see the competition from Paytm and other lenders like KrazyBee?
Lizzie Chapman: We don’t have much competition in our space (online point-of-sale finance). We have large offline competitors such as Bajaj and Home Credit but they do not invest heavily in technology and automation. We are genuinely end-to-end digital.
We believe this leads to the best user experience, round-the-clock service, and also the lowest operating costs, which means lower fees for customers. Also, we have our own proprietary decision and risk engine, which has been trained for over three years in using a lot of alternative data. This means we can approve more customers compared to lenders who rely heavily on CIBIL score.
The Passage: How do you plan to target small-town shoppers?
Lizzie Chapman: We have seen the majority of our recent growth coming from tier 2 and 3 cities, and our users find us, usually, while searching for a suitable platform to avail credit from. ZestMoney is probably the easiest, and that's why we are a favourite among our customers. To further benefit these shoppers, we continue to expand our network of merchants with a vision to make ZestMoney ubiquitous.
The Passage: Will your services be available in offline stores?
Lizzie Chapman: Yes! We are currently piloting cardless EMI in-store with select partners. We expect to see this ramp up this year.
The Passage: How have the new-age fintech services changed things for us?
Lizzie Chapman: India is undergoing a fintech revolution. As per Credit Suisse, digital payments are going to reach USD 1 trillion by FY 2023 from the existing USD 200 billion.
The main driver is digital adoption. We have more than 400 million people online, most of this is mobile-led. A further 480 million people are still using a feature phone but will be online in the next few years as the cost of digital data in India is the cheapest in the world.
India is betting on being a truly digital economy, our government is building some of the best digital infrastructure in the world. That includes UPI — the unified payments network which allows real-time, instant money transfer, any time. We believe that because of UPI, card as a form factor will cease to exist in a few years.
Fintech has become the backbone of our economy, and in the past five years the industry and the penetration of digital finance in India have grown astoundingly. Who would have imagined a roadside vendor in a tier 3 city availing EMIs few years ago?
A recent report by EY revealed that fintech adoption in India is at 87%, which is a validation of the hard work put in by the entire industry to make fintech services easy to understand, and access.
The Passage: Amazon has partnered with Capital Float for its own financing service. How does that affect your partnership with Amazon?
Lizie Chapman: Like I explained above, ZestMoney credit limit can be used anywhere to shop online and in-store. It is ubiquitous and we are adding new merchants every day in different domains. Users who avail credit at one particular outlet cannot use that credit elsewhere. Whereas, ZestMoney can be used across almost all online platforms. This is a significant advantage and is the reason that we stay unweathered by competition.