Zip is pouring $70 million into an Indian BNPL

ASX-listed buy-now-pay-later Zip is ramping up its offshore presence in one of the world biggest markets, taking a US$50 million (A$70m) stake in Indian BNPL ZestMoney.

The six-year-old Indian fintech is the country’s market leading BNPL, with more than 11 million registered users, more than 10,000 online merchants and  75,000-plus physical stores on its customer base.

Zip (ASX: Z1P) will take a minority shareholding in Series C Preference Shares, with the deal also offering the chance to increase the stake
it’s shareholding over time, amid conditions such as a seat on the board.

The decision is undoubtedly driven by the sheer potential of a largely untapped market in the world’s fastest-growing large economy. Around half of India’s 1.4 billion citizens are classified as middle class, although they’ve been hard hit by the coronavirus pandemic over the past 18 months.

In a statement to the ASX, Zip said India has the potential to become one of the largest markets globally, generating more than US$300bn in BNPL payment volume by 2026.

More than half of the population is under 30, with that cohort expected to drive the nation’s consumption amid a rapid rise in wealth. Online shopping currently has low penetration in India, with around 100 million using eCommerce, but that figure is expected to more than  double over the next four years to 220 million by 2025, worth $120bn.

India’s BNPL user base has the potential to reach c. 80-100 million users by FY2026, compared to the current 73 million credit card users.

ZestMoney’s appeal to Zip includes the fact that it offers short term loans (15-30 days) as well as longer ones (3 to 18 months).

Zip co-founder and CEO Larry Diamond said that BNPL plays a crucial role in driving access to credit in India.

“With more people using digital payments and online shopping, ZestMoney can positively impact hundreds of millions of lives in the coming years,” he said.

“With deep partnerships with online and offline merchants and lending partners, ZestMoney 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.”

ZestMoney co-founder and CEO Lizzie Chapman welcomed Zip’s investment in her fintech.

“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,” she said.

“We believe India will leapfrog traditional products like credit cards, along with many other emerging markets, going straight to digital payment solutions. We strongly believe India will emerge as the largest BNPL market in the world over the next 5 years.”

Zip’s is strategic investment is subject to several conditions, but if satisfied, is expected to complete before the end of September.