India’s ZestMoney raises $20M to grow its digital lending service

Fintech is very much still hot in Asia. ZestMoney, a startup that helps consumers with no credit history get loans to buy online, announced today it has raised a $20 million Series B.

The round is led by Quona Capital, a stealthy Washington-based fund that invests in emerging market fintech and has an office in India. Others participating included new backer Reinventure, an Australian fund which includes Coinbase among its fintech portfolio, as well as returning investors Ribbit Capital, Omidyar Network and Naspers -owned PayU. The round takes ZestMoney to $42 million to date, it previously raised a $13.4 million ‘Series A2’ led by Chinese phone giant Xiaomi last August.

ZestMoney was founded in 2015 by Lizzie Chapman (its CEO), Priya Sharma (CFO/COO) and Ashish Anantharaman (CTO). The trio — pictured at the top — met working at Wonga after Chapman moved to India from the UK to head up the controversial pay-day loan company’s local business. That venture ended up falling through and the rest is history, as they say.

Unlike Wonga and its ilk, ZestMoney is very much a consumer-centric loans company. That’s to say that it works with consumers who have no credit card, limited credit history and often very little assessable data, to help them build a profile and become ‘credit-worthy.’ That typically begins with small loans, which grow as a customer repays successfully.

The startup has partnered with over 800 merchants, including Flipkart and Amazon, to offer financing options at point-of-sale. That helps retailers close out transactions whilst enabling consumers to buy medium-to-large ticket items, which typically include electronics, education and learning costs or vacations. Most of its transactions happen online, but Xiaomi is a major partner helping ZestMoney’s offline push.

Small loans don’t generate a return that makes the hassle worthwhile for banks, but that’s where startups like ZestMoney come in. It aggregates the smaller customers and manages the details, making it an attractive partner at scale for banks — and that’s another stakeholder that the startup works with.

All in all, the approach runs in stark contrast to the ratchety terms that Wonga and others force on consumers who use their credit services.

As Chapman told us last year: “New age fintech is much more optimistic… the thesis is ‘Behave well and do good things and you’ll get cheaper pricing.'”

Speaking to TechCrunch this week, the ZestMoney CEO said the new capital will towards further increasing the focus on technology. That includes AI for credit assessment and other analytics, as well as developing voice-based communication and facial recognition technologies that will help engage consumers who are less comfortable with English as a language and lack experience using the internet and digital services.

The company is also beginning to cast its eye overseas, and it has opened an office in Singapore as it begins to assess expansion opportunities in the Southeast Asian region. Singapore is the regional hub, especially for fintech, but Chapman said the country itself isn’t likely to be a market for ZestMoney. She also cautioned that expansion isn’t likely to come in the immediate future.

“We’re looking at doing things around the Southeast Asia region,” she explained in an interview. “We won’t dive in and start operating in 10 other markets overnight, but a lot of countries [there] have synergies with India. There could be opportunities to work with local e-commerce companies or perhaps license our technology.”

The main focus for ZestMoney will remain its home market in India, however.

“There is still a huge, huge ocean of demand in India,” added Chapman — who spoke at our Disrupt Berlin event last year. “We still see sub-five percent financing online and it is just 30 percent offline.”

With that in mind, Chapman said ZestMoney is making a more concerted push around its in-store financing option that works directly with physical retail partners.

Quona Capital co-founder and managing partner Ganesh Rengaswamy echoed Chapman’s belief that there is still plenty of growth opportunity in India.

“ZestMoney and Quona’s partnership is very symbiotic given the shared values of addressing big challenges in emerging markets fintech, market leadership through responsible high growth, and delivering financial accessibility to vastly underserved consumers,” he said in a statement