Tag: zestmoney

Why no-cost EMI is no free lunch

Personal Finance

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A coffee time chat between two colleagues leads to an interesting explainer on an emerging loan product.

Vina: Hi Tina, did you check out the ongoing festive sales online? I have shortlisted a few items to buy.

Tina: No big ticket purchases this year, Vina. Spent a lot last month. It’s time I tighten my purse strings.

Vina: Why don’t you try the no-cost EMI options offered by many sellers, including e-comm websites?

Tina: No, Vina. No-cost EMI is a misnomer.

Vina: Why do you say that? The EMI instalments include no interest or any other additional charges. Plus, you get to defer the payment on your purchases by 3 to 12 months. What more could you ask for?

Tina: That’s not entirely true. Many banks, NBFCs (Bajaj FinServ) and other financial institutions (such as ZestMoney) with whom e-commerce websites have lending tie-ups, charge a processing fee on such no-cost EMI options. Starting from ₹99, the processing fee can go up to 1 per cent of the order value. Besides, a few also levy additional charges on pre-closure of loans, which may apply even if you return the product or cancel purchase.

And like any other loan, the instalments in no-cost EMIs also include an interest component, which however is offered as an upfront discount, hence the term ‘no-cost’. This interest ranges from 12 to 15 per cent per annum.

Vina: Yeah, isn’t that good saving on the interest front? Imagine how many people could benefit.

Tina: There is another catch here. The no-cost EMIs are only available for existing customers (debit or credit card holders) of the bank with whom the e-commerce site has partnered. These customers must have an existing pre-approved credit or overdraft limit with the bank. Moreover, this option is available only on purchases over a certain limit, ₹5,000 in most cases. Besides, part payment is also not an option. You need to either make full payment or avail a no-cost EMI option in full. But the advantage is that one can avail the loan online and almost instantly, without visiting the branch and submitting numerous documents.

Vina: Oh, these are part of pre-approved loans? Clearly those who have already exhausted such limits with their bankers, or have low or no credit score cannot avail no-cost EMI options.

Tina: Right. However, there are new fintech players such as ZestMoney, that provide such no-cost EMI options online to even those with no cards, credit score or such pre-approved limits. One has to just register their Aadhaar-linked mobile number on the platform and complete basic KYC for onboarding. Post this, the website approves a certain credit limit based on your transaction history and the customer can avail the no- cost EMI option on its partnered websites. These come with varying terms and conditions.

Vina: But then again, I need to verify if such players have partnered with the store where I want to make a purchase, or if the product of my choice is entitled for such an option from the fintech players.

Tina: Right! Net-net while no-cost EMIs do sound exciting, remember that there is no free lunch, ever.

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ZestMoney raises USD 50 mn funding from Zip Co, BFSI News, ET BFSI

Personal Finance

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ZestMoney, which offers Buy Now Pay Later (BNPL) platform, on Wednesday said it has raised USD 50 million (about Rs 369 crore) from global BNPL provider Zip Co Ltd. This is part of a larger series C fundraise that will see participation from existing investors, a statement said.

Zip will acquire a minority shareholding in the company and a board seat as part of the investment, it added.

ZestMoney plans to deploy the funds to expand the product suite, deepen the transaction network, strengthen its balance sheet capacity and launch new business lines in insurance and savings, the statement said.

The company has raised USD 120 million till date from investors including Ribbit, Goldman Sachs, Quona Capital and Xiaomi.

Zip – which was founded in Australia in 2013 – has a presence in 12 markets across five continents, serving more than 7.3 million customers and over 51,000 merchants.

Founded by Lizzie Chapman, Priya Sharma and Ashish Anantharaman in 2015, ZestMoney allows customers to pay for products over time. Increasing smartphone penetration, cheapest data plans in the world and boom in online shopping has propelled the demand for BNPL offerings in the country.

ZestMoney offers the entire spectrum of BNPL offering from 30 days to 24 months and ticket sizes ranging from Rs 50 to Rs 5 lakh. The digital omnichannel BNPL player allows customers to transact at over 10,000 online sites and 75,000 physical stores across the country. It has 11 million registered users.

Smartphones, large appliances, fashion, travel, home decor, ed-tech are the largest categories on the platform. Electric bikes, ayurveda products, and personal care are popular among customers using the pay later option.

ZestMoney partners with 25 banks and NBFCs to power BNPL transactions for consumers across the country.

“We are thrilled to have Zip come onboard for the next phase in our journey of powering affordability in the lives of Indian consumers. This is a deep validation of our position as market leader in the Buy Now Pay Later category in India,” ZestMoney CEO and co-founder Lizzie Chapman said.

The shift towards pay later solutions is a global phenomenon and represents young digital consumers looking for transparency, honesty and no hidden charges in financial products, Chapman added.

“We believe India will leapfrog traditional products like credit cards, along with many other emerging markets, going straight to digital payment solutions. Over the last year we have seen applications for BNPL go up by 5X on our platform. We continue to invest in deepening partnerships with our merchant network and hiring the best talent,” she said.

ZestMoney strongly believes that India will emerge as the largest BNPL market in the world over the next five years, she added.

Larry Diamond, CEO of Zip Co, said while BNPL is emerging as a preferred mode of payment globally, in India it also plays a crucial role in driving access to credit.

“With deep partnerships with online and offline merchants and lending partners, Zest Money is poised to accelerate growth as the market develops. We have been incredibly impressed with the founders and leadership team and look forward to the next stage of the ZestMoney journey,” he added.

ZestMoney recently secured the Corporate Agent licence from Insurance Regulatory and Development Authority of India (IRDAI) allowing it to offer and enable insurance products to users on its platform.



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Ezetap, BFSI News, ET BFSI

Personal Finance

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Customers are increasingly preferring to pay through EMIs while buying high-value consumer items, as affordability has become a key factor in the post-pandemic scenario, payments solution provider Ezetap said on Thursday. Buying ability of consumers across the country has been significantly reduced due to the pandemic. They are either avoiding a single big payment or entirely skipping to buy any new item, Ezetap said.

This has impacted sales across brands and created a vast need for affordable solutions for customers across different sectors.

Ezetap has recorded a steep increase of 220 per cent in the transactional volume of equated monthly instalments (EMI) in July 2021, compared to February 2020. EMI volume as part of total transactions has increased to 18 per cent in the mobile and consumer durables segment, compared to 9 per cent in the pre-pandemic period of March 2020, it said.

“This indicates a growing inclination of consumers towards affordability solutions, which help increase their purchasing power. This also indicates that EMI or affordability presents a massive opportunity for brands to grow their sales across diverse product segments,” it added.

Delhi led metro cities with an increase of 258 per cent in total EMI volume followed by Bengaluru, clocking a growth of 206 per cent.

There has been a significant increase in the adoption of EMI transactions in non-metro cities with a combined contribution of 59 per cent in the total EMI volumes. Ahmedabad and Pune registered growth figures of 230 per cent and 210 per cent, respectively.

“This shows that affordability solutions play a positive role in impacting sales…This may be partially attributed to the fact that a large portion of the working population have moved back to their hometowns due to work from home models, and have contributed to EMI sales in their respective hometowns” it added.

According to Ezetap, a surge in debit card EMIs is one of the main reasons behind the steep increase in such transactions and it has increased significantly with nearly 25 per cent contribution in the total EMI volumes.

Through a tie-up with several banks, Ezetap offers instant EMIs via credit and debit card. The average ticket size of EMI transactions recorded by Ezetap has increased from Rs 18,000 in February 2020, to Rs 32,000 in July 2021.

In a move to expand the benefits of EMIs, Ezetap has also tied up with ZestMoney to provide NBFC EMIs.

Another factor for large-scale uptake of EMIs is no-cost EMIs and vouchers available to customers by various brands. Nearly 50 per cent of Ezetap EMI transaction volume can be attributed to no-cost brand EMIs, it said.

On the mobile and consumer durable space, there is at least one card offer being rolled out by various brands to drive more sales. Ezetap has also partnered with Xiaomi to provide EMIs to customers.

Customers are avoiding bulk payments and preferring affordable payment options to reduce the monetary burden, and some non-metro cities have growth of over 200 per cent in EMI transactions, Byas Nambisan, CEO, Ezetap, said.

“We have been able to reduce the transaction time by nearly 80 per cent and eliminate the manual errors with EMI integrated into the merchant’s billing POS. We will continue our efforts to provide the retail businesses with robust and integrated Buy Now Pay Later solutions, like EMIs, to improve the purchasing power of their end customers,” he said.

Ezetap has forged tie-ups with banks such as Axis Bank, HDFC Bank, Citibank, State Bank of India, American Express, Yes Bank and ICICI Bank. PTI KPM KPM BAL BAL



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