One of America’s largest banks has just poured in some money to help millions of Indians without a credit score secure loans and make purchases online for the first time in their lives.
Bangalore-based ZestMoney announced today that it has raised $15 million from Goldman Sachs and existing investors Naspers Fintech, Quona Capital and Omidyar Network. Lizzie Chapman, co-founder and chief executive of ZestMoney, told TechCrunch in an interview that the new investment is part of an extended Series B round, the first tranche of which was announced in April this year.
The extended Series B round brings ZestMoney’s total raise to-date to $63 million, she said.
The penetration of credit cards remains very low in India; roughly three in 100 people in the country have a credit card. This has meant that very few people in the nation have a traditional credit score, which banks heavily rely on to establish one’s credit worthiness before issuing them a loan.
Moreover, small loans don’t generate lucrative returns for banks, giving them less incentive to write such cheques. In recent years, a growing number of Indian startups has stepped in to address this void.
ZestMoney assesses other data points and uses AI to help these people build a profile and become credit-worthy. The startup has partnered with more than 3,000 merchants — up from some 800 in late April — including Flipkart, Amazon and Paytm to offer financing options to customers at point-of-sale.
It has amassed more than 6 million users, who can access credit of $140 to $3,000. To make the deal even better, many of these merchants offer interest-free option to customers, provided they could pay back in a specified amount of time.
The startup, which maintains partnership with nearly every online payments processor in the nation, including Razorpay, BillDesk, Cashfree, CCAvenue and PayU, has also made a push in the brick and mortar market by inking deals with Chinese smartphone maker Xiaomi and Pine Labs, which has deployed over 300,000 point-of-sale machines across the country.
ZestMoney has also raised an unspecified amount of debt, which it uses to finance credit to customers. It recently entered into a strategic partnership with Credit Saison, a Japanese financial services company affiliated to Mizuho Financial Group, to deploy $100 million toward expanding digital lending in the country.
Philip Aldis, a managing director at Goldman Sachs, said the firm’s investment in ZestMoney would enable more households in India to access credit. “We look forward to leveraging our global experience and network for the continued growth of ZestMoney,” he said in a statement.
Goldman Sachs has written checks to a handful of startups in India, including logistics startup BlackBuck, home rental platform NestAway, news aggregator DailyHunt and online furniture store PepperFry.
The New York-headquartered firm, one of the world’s largest trading banks, has also invested in a number of financial startups, including NuBank, a Brazilian firm that offers digital credit cards to smartphone users. It is also the banking partner for Apple Card.
ZestMoney aims to disburse credit of worth $1 billion in 18 months and reach 300 million users one day. Digital lending in India is expected to be a $1 trillion opportunity in the next five years, according to Boston Consulting Group.