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In this episode of our podcast Banking & Beyond catch Lizzie Chapman, CEO & Co-founder, ZestMoney share her journey with us, from being an investor in the UK to being a co-founder & an influential voice in the Indian fintech space.


Transcript:

Devika Garg

Welcome to Power Conversations at RBL bank. This is a special edition series where we are in conversation with inspiring women founders who will share with us their startup journeys. In today’s episode of leading ladies, I’m delighted to welcome Lizzie Chapman, the founder and CEO of ZestMoney. ZestMoney is India’s leading digital lending platform that has innovated the concept of cardless EMI with the moto to make life in India affordable. Lizzy is of the belief that technology can positively disrupt financial services delivery and that prompted her to co-found ZestMoney in 2015. Lizzie is a CFA charter holder, University of Edinburgh graduate, and prior to taking the entrepreneurial plunge, she has worked with Goldman Sachs, the Wellcome Trust, Wonga, and DBS India. Welcome Lizzy. I’m delighted to be in conversation with you today.

Lizzie Chapman

Thank you so much. It’s a pleasure to be here.

Devika Garg

Looking forward to a very interesting conversation with you today.

Lizzie Chapman

Yes, far away.

Devika Garg

So let’s say I was very fascinated by your career graph, right. You started your career with Goldman Sachs in equity research and asset management. And then you moved on as an investor to the Wellcome Trust, which I believe is one of the global largest endowments that we know now. Then you came to India in 2011 to head operations for Wonga, which was yet to launch it, yeah. And thereafter you moved to DBS to launch their mobile bank, Digi Bank, and then found co- founded ZestMoney in 2013. So I’m extremely interested to know that with ZestMoney, what is it that you were trying to solve for and what fascinated you to launch in India?

Lizzie Chapman

It’s a good question. And it’s not as strange a path as it might sound. And actually India and India financial services is the common link. So I started going like you say equity research and they gave me global banks as a sector. And in London, there’s a lot of investors that are fascinated by the Indian banks. So I obviously developed a fascination and I studied, the HDFC, the ICICI, this was pre RBL actually. And I became fascinated, because I observed that if you added up the entire balance sheet of the Indian banks, you got to something about the size of like a large Brazilian bank, one large Brazilian bank. So there was clearly a huge amount of asset and credit growth that was about to happen. But it wasn’t clear how. So I started studying the NBFC, micro finance, at the Wellcome Trust, I was an investor in all these companies. So I was investing in micro finance, we invested in gold lending everything. And I was spent a lot of time on the ground. And at the Wellcome Trust, we were privileged to have a long time horizon. So we did deep research and I spent literally months and years talking to, SMEs, consumers retailers, trying to understand the growth in things like Bajaj and Muthoot Finance. It was very obvious that technology was needed to come and really disrupt this space. And to get to genuine penetration levels that we were seeing in the West, it felt that it would be impossible to get to the type of credit penetration we see in other countries in India, relying only on physical distribution. And so then, Wonga approached me, which was at that time, a very exciting startup in London, and they said, We’re going global, will you help us launch India because, I had this kind of a reputation for understanding Indian financials. The minute we landed in India to help Wonga, we realize that it’s such a big opportunity and that it needed to be its own company, we didn’t want to be part of a bigger organization. So we started planning then, which was probably nine years ago, to spin out and eventually start. And I think the what finally made us do it was about 2015. We realized still nobody had done what we had imagined. Bajaj continued to grow. Lots of companies, banks started to launch debit card EMI and different versions of EMI. But the way we had envisaged it, which was a completely digital product, working with e-commerce, nobody had done. And at one point, we just said, we have to do it now. We’ve been talking about it for six years, we have to do it now or somebody else will. And I think that’s as good a reason to do something as any. And so at the end of 2015, we all got together and launched and the rest is history.

Devika Garg

Super. So therefore, because you’ve seen the digital lending space evolve in the last decade. So I think you’re just the right person, what are your views and how the consumer landscape has evolved in the past decade.

Lizzie Chapman

Amazing, we never could have predicted this, I can’t kind of talk about this wildly enough. It really has been one of the most interesting things in history. There’s never been a population of consumers anywhere in the world that has kind of overnight digitalized every part of their life in the way that the Indian consumer has. And I talked about this a lot, because I think having a global view helps. When I go to London, lots of my friends are still very nervous of their smartphone. They don’t transact on their phone, they would never book a flight ticket. They still read physical newspapers, there’s still a lot more analog. You walk around Mumbai. I mean, this is people’s body part. It’s literally like it determines everything. I joked on another panel, that people’s first experience of falling in love is now digital, right. They don’t actually meet anymore. Education is now digital, everything we do consume content education in India is digital first. And that is unique. Most people go through a much more stumbling path. So it’s not an exaggeration to say that we will be a leapfrog country, especially when it comes to financial services. Because so many products that are needed and valued in any thriving economy, like insurance, are at such low penetration, but can quickly catch up if we completely digitalize not just the distribution, but even the servicing and the product delivery. And I actually don’t think that there’s anywhere in the world where the consumer is as ready, consumers here are ready, they’re very inquisitive, they are also very value conscious. And the brilliant thing about completely digital products is they tend to be better value, right. You cut out a lot of the operating costs. So I think this is the most interesting market in the world for building digital products without a doubt.

Devika Garg

So you just mentioned leapfrogging, and I believe you also have on various occasions mentioned that the Indian consumer is going to leapfrog into the buy now pay later, cardless EMI module, and majors kind of bypass deeper penetration on the credit cards. Right. So a What makes you think so that I would be interested to know, what has this money done to build its capabilities? Because this is a very large market that we’re talking about now. What are the capabilities that you’re building to address this larger mass?

Lizzie Chapman

That’s a great question. Yeah. So this is a theory we’ve actually had since where we first arrived in India, what 10 years ago, we believe that credit card as a physical form factor was probably not the right form factor for credit distribution in India. And there’s a few reasons for that. I mean, one very simple, obvious observation is, it’s a really old fashioned technology, right cards are like 70 years old. They were designed when people didn’t have technology in their life, and certainly not smartphones. And so it was an authentication mechanism. We have much better authentication mechanisms in India today, right? All the way down to a fingerprint or iris, which is really groundbreaking. And so why do we need to invest in this physical infrastructure that’s not very robust, very expensive, right? expensive for the customer, expensive for the bank, expensive for the merchant, and doesn’t necessarily solve the problem when we’ve got better, faster, cheaper ways of solving the same problem. And more specifically, what’s happening around the world is young people are becoming very cynical about credit cards. And this has been a phenomenon over the last decade that has culminated in the emergence of these alternative credit products. The reason people are cynical about credit cards is, the business model itself does require customers to effectively pay late payment fees, right or excess fees because the interest free period is free. And then only when there’s some sort of delay or late payment does the bank make money. Now, nothing wrong with that. But young people today are so smart and savvy and connected on the internet, that they find business models like that a little bit cynical. And I think in India, people are even more savvy, they hate paying for things they don’t need to. So the idea of late payment fees or rolling fees is really, really uncomfortable to most especially young, digital Indian consumers. So I would actually go so far as to say even the business model of credit cards doesn’t really make sense for the mass market majority of used cases. And the beautiful thing is that today with the payments technology we have in this country and the infrastructure we built, especially rails like UPI, we don’t even need a lot of what went into building a credit card, right. Not mentioning names, but the largest switches in the world have built their whole business around needing that rails in the middle, which, frankly, UPI has, has replaced. So we believe and we’ve been, hard at work on this for the last five years, we believe that credit can be distributed in much simpler ways, primarily by working with the distribution points where people consume the credit. So we do something that we call contextual credit, meaning we try and embed the delivery of the credit in the transaction. So whether you want to go into a physical store and pay at a POS machine, we are there, we’ve embedded into the POS machine with partners like pine labs, but whether you want to pay on a checkout on Flipkart, we are also there, we’ve embedded within Flipkart. So what we’re trying to do is bring the credit to the customer, rather than them having to go off and for example, get a credit card. The reason this is really powerful, and hopefully to your point, sets us up for scale is we can actually then really democratize the delivery of credit. Today, to get a credit card in India, you really need to have a certain income level credit score, and you need to be valuable enough to the bank, because it is this expensive infrastructure. So you probably need something like a two lakh credit limit for the whole thing to really make sense. We can make a loan or a credit facility down to like 200 rupees, right. It’s simple because of the technology we built. So suddenly you open up even use cases and customer segments, that would not really necessarily be served well by a credit card. So that’s the other angle to it. And that’s why we think that there could be phenomenal growth over the next few years, but, within a very sort of customer focused and transparent framework.

Devika Garg

Great. So taking from there, what has been the effect of the pandemic, on this business model? And do you think that the future of digital lending, like you envisaged would also lead to mainstay banks taking a stake in it? Because eventually, I think Neo banking is becoming the buzzword as we speak today. So would like to know your views on that.

Lizzie Chapman

Brilliant. Yes. So the pandemic has obviously been a roller coaster for every business. I think in, March and April, none of us knew how bad or how severe the economic impact would be. And so initially, it was obviously a very daunting time. And we had to take a lot of risk off, be very conservative really focused on things like collections and repayments, we though spent that time refining all of our models, especially on the risk side on the collection side. And sort of I mean, without being cynical, taking advantage of the opportunity, how could we make our business stronger in the future, from this experience we’ve gone through, and again, the beauty of a digital model is you can just do that quickly. So we could quickly iterate our models within, days, we had a new income shock prediction model, right, which I think, would take banks quite some time to build, we could launch that immediately. And it was a self-learning model. So as we got more and more data about defaults in our portfolio, combined with macro data about the economy and the path of the pandemic, the model could update and basically predict the propensity of a customer to go into a reduced income, for example. So that’s just to give you an example of how a digital model can actually react quite quickly in a stress scenario, like a pandemic. Similarly, the moratorium was obviously a big impact for every lending business. But again, a digital model allowed for us to respond very quickly. We were one of the first consumer lenders in the country to launch a moratorium product as far as we know. I think we launched it within 24 hours of the announcement so fully digital moratorium product where the customer could self-serve and opt in on the app. And importantly, we then built a whole amount of personalization around that product. So we could say, for example, to anybody in the airline industry, bespoke, you should opt in for the moratorium for this period, this is what your repayments will look like on this date. Whereas we could say to somebody who hadn’t lost their job, you shouldn’t, because it will be an extra cost. So we had all that level of personalization. So it was a brilliant experience. In a way we really tested our AI and data driven approach. And we put in place some incredible best practice that will make repayments and collections and risk in the future Far, far, far better. And to your point there about working with banks, I wanted to touch on that, because one of the biggest things we observed during the pandemic, and almost from day one was that the bank and large NBFC partners that we work with, we’re having some challenges Now a couple of specific things. One was that a lot of their collections is cash based or in person or branch based. And immediately that stopped. And so quite a few of them reached out to us and said, How are you collecting? What are you using, and we had really interesting dialogues about UPI, and recurring UPI and digital repayments. Another similar one was around the moratorium, people were using call centers and sort of non technology approaches to implement the moratorium. So we shared some of the methodology we use. And it was actually a time of great collaboration, because I think for once the banks really kind of appreciated, and were really interested in the ways that we were using technology, and not just in the traditional things like customer sorting, right, I think banks are brilliant at understanding that. It was it was a time when we could also showcase some of the other ways we use technology in the business that have traditionally been more operational. So we think that the future is really bright for bank-tech collaboration. And the pandemic has sped that up, probably by about two to three years, we’ve always had the view that banks, especially in India, should be the regulated entities that preserve capital and look after people’s deposits, that should not change. But that deep integration with technology companies can lead to the best possible customer experiences. And that’s how we work we are not a balance sheet, we only work with regulated banks and NBFCs, but we try and create products for them and their customers that are just so much more digital and therefore can perform really well. Even during a pandemic.

Devika Garg

You mentioned your co-founders, Lizzie, I’m curious to know, how is the synergy of you mentioned great synergy. How, what is the working rhythm? How do you kind of distribute your work? What are the strengths that each of you bring to the table? And how do you lead together.

Lizzie Chapman

So I’m really, really lucky to have the most incredible co-founders. And I will say to people, don’t even think about starting up until you’re sure, sure, sure about your co-founders because it’s probably more deep and intense relationship than a marriage, I would almost say, the amount of time and stress you guys will go through together. And so having two co-founders that I don’t just respect and love, but have a deep comfort with because we’ve been working together effectively for nearly 10 years, has always been the support system. And so even in the most difficult times, like at the height of the pandemic and moratorium and what was going to happen in the world, it was brilliant for the three of us to say that we always get through these things. We’ve seen so many things like this, we always get through it. So I think co-founders are really critical. And I think this is a good model for all co-founders, but we work together for a few years in a company. So sometimes when people say how do I find a co-founder, I’m like, look back through all your previous colleagues, because one of them is probably the best co-founder. And I think we knew how we all worked. And we knew our different skill sets and different personas as well. We’ve got very different personalities. And we knew we were really complimentary. So, I’m very much into the growth and partnership side of things. I love new products. I love launching things. I love seeing growth and nurturing, growing things. Priya is all about scale and operations and how do we create scalable processes and robust practices. So that’s a brilliant combination. If you think about it, we’ve got that sort of someone once said, my job is to put the accelerator on, and hers is to operate the brakes, right and that’s a really good, personality match as well. Then we have Ashish in the middle and he is the best, the incredible CTO But that means he just brings a completely technology and data approach to everything. I mean everything, even when we’re trying to solve an HR problem or a legal problem, he says, How can we do this with AI, or data or whatever. So it’s brilliant, because the three of us have such complementary skill sets & experiences. And then even I would say, in our sort of personalities, I’m always the kind of hyper optimist, Priya is the realist / cynic which works really well as well, we have that brilliant and you want that in a CFO and a risk manager. And then Ashish balances it out, again, in the middle, so even when things are really tough, one of us will be able to bring up the other. And similarly, we never sort of lose sight or lose touch, we keep our feet very grounded, because we have that balance. So I think it’s one of the most important, important things for success, and for your own personal satisfaction and mental health, right, it’s really important.

Devika Garg

Totally agree. And I hope this becomes the inspiration and lens for other co-founders who are kind of getting together to lead businesses going forward. Thank you for that Lizzie. I’m also very, very interested to know about, you’ve been part of organized & very established organizations, and now you are also establishing an organization yourself. How has your leadership style evolved over the years?

Lizzie Chapman

A really good question. I’ve been thinking about this a lot recently. And, it’s a bit of a cliche, but especially in a startup person’s personal development, and journey cannot often perfectly match the speed at which the company is growing, right. And we really are growing at quite a pace. So it’s very important to do that kind of self-reflection. I think what I have learned, though, and it’s taken some time to get here is that the best leadership style is just one of deep authenticity. And I think when you’re young, and you’re first given leadership roles, you typically try and emulate other good leaders that you see around you. And that’s very obvious. And that makes sense. But what I’ve learned, maybe the hard way is people that work for you need to trust you, they need to believe that you’re taking them into battle, and what you’re doing, and that you have a plan. And if in any way it feels like you’re acting, or you’re unauthentic, that trust level will go down. So I think I’ve learned over the years to be a little bit more vulnerable, bring the real me into the boardroom, or whatever they say, and show people that you really are, what you say you are, and therefore they will trust you more when it comes to decisive action. But I think, my style is definitely quite hands off. I really believe in being more of a coach than a sort of manager day to day. And believing in people and believing in their abilities to navigate is really important. And if you don’t have that sort of belief and trust in your team, then it’s not going to work anyway. So you probably need a different team. So I just I just have really excellent people, we have a we have an amazing, amazing management team. It’s, I think phenomenal. And so really, my job is just to kind of give them the vision and a belief system and let them go off and do their stuff.

Devika Garg

Know what you said is so true. So well said, bringing up putting your vulnerability out there, it’s very difficult. And in order to do this, I think that opens up everybody around you in a very genuine manner. So I think well said and Lizzie you are very inspiring. I’m getting inspired listening to you speak and have been in conversation with you. And I’m sure you are one of the most inspiring women leaders and entrepreneurs out there. But who inspires you?

Lizzie Chapman

I find it so difficult this question because there’s so many. I really do think in India in financial service, we are so spoiled. It’s it’s unique. I mean, it’s certainly not the same representation in London where I was, and obviously in the US, I think they they’re years behind. I remember in the early days meeting people like Naina Kidwai at HSBC, Shinjini Kumar, who’s worked at Citi until recently, all these, powerhouse women. One woman only made a massive impression on me in the early days when I first came to India, was Zia Mody. I don’t know if you’ve met her but she is so brilliant because she’s so authentic. And she really does bring her whole self and she takes no nonsense. So I think we are really spoiled in this in this industry in India. In the world. There’s also so many incredible women. But honestly, as well, it’s gonna be super cheesy, but I also look at my mother a lot. And I think a lot of us I’m guessing a lot of women like us who’ve built good careers. First inspiration was probably our mother, because she showed us that you can do that and raise a family. Right? So, and in an era where it was so much harder. So I think the achievements of my mother actually more outstanding than me for sure. Because she did it against a backdrop of so much more hostility. So she keeps me going, whenever I think, Oh, this is hard, I think God how did she do it in a much more challenging environment and with no technology or anything to help.

Devika Garg

Also, this is a question which I have been kind of thinking about, and I don’t know if it’s true, but just wanted to get your views around it. We do see a lot of studies, talking about how challenging it can get for women founders to raise capital, what has been your experience in this, and do you think this still remains the case in the current scenario?

Lizzie Chapman

So it’s a hot debate, and I’m on obviously various women’s founder groups and things like that we talk about this a lot. The data is appalling. I mean, it’s really bad, there’s no two ways about it. And India is no different to the world, it’s probably slightly worse, we also in India have a big deficit of female investors. So despite having great women in banking, that hasn’t translated into the private equity and VC industry, there are very, very few women, decision makers in the big firms. And that does impact because women will perceive that it will be tougher, even if it isn’t, obviously we are a bit we kind of maybe were the exception that, prove the rule. But we honestly haven’t faced too much of a challenge. And we’ve generally had capital available when we needed it from the investors that we wanted it from our last round was Goldman Sachs. And they said it was their first female founders investment they’ve made from that team, which was quite funny. So I suppose we’ve been able to defy this sort of bias. But what I do think on this topic, and I, I don’t know if I sound a bit naive or arrogant when I say this, but I think it’s really important for women founders not to obsess about this topic too much. And not to kind of imbibe a sort of victim mentality before you’ve even gone out and tried to raise money. I think that the most important factor in raising money is believing in yourself, and believing in your business and your opportunity. And you have to convey that conviction to any investor, whoever they are. And if you go into that process, believing that there’s bias and that you’re going to fail, and it’s not going to work. It’s a self-fulfilling prophecy. Sometimes, I think it’s really important that another sort of funny thing I sometimes say to women in my team is, look, you probably had to work a lot harder to get where you did, than some of the guys, the same age as you. So you could argue you’re a bit better than that you should have more confidence in your abilities. And it’s probably the same in entrepreneurship, right? I think if a woman is going out there, being bold enough to go and start up and raise capital and approach the big VCs, she’s pretty damn awesome. So she should actually go at that with a huge amount of confidence and self-belief. So I think that’s probably why we did it. We didn’t we never thought we couldn’t, we never had any doubt that we were doing the right thing and that we were the right people to be doing it. But yeah, the data, definitely shows we we need to do some work as an industry.

Devika Garg

Any other tips that you would like to give to younger Lizzy’s, who are kind of now setting out to achieve their dreams? How to go about it. You mentioned a lot during the course of the conversation, but any other tips that you would like to share?

Lizzie Chapman

I do. Yeah, I think role models are important. So I’m not going to lie. I did spend a lot of time I think when we started out watching videos of like Sheryl Sandberg and Marissa Meyer, because seeing those women, and often what you realize when you watch those women, especially on videos, rather than the written word, is they’re actually very down to earth. They’re very normal. They’re not sort of enigmas. They’re women just like you and me. And they have just done a really good job. They’ve worked really hard with focus and dedication. And that’s what’s got them there. It’s not magic. And so I think focusing on that and surrounding yourself with good people. To the extent you can find mentors, people that you can just reach out to and have chats of whatever gender it doesn’t have to be women. But I have really good strong mentors. I have a lot in our industry, as I say, men and women, and I’ll often just reach out for a chat, nothing specific, but it’s just super, super supportive to see the bigger picture and kind of a longer view. And then I think maybe the only other thing the only learning that maybe I wish I’d known then and I know now is the importance of your investors and also picking the right investors for you and for your company and having a really good rapport with them is obviously hard in the early days, because you just want money, you don’t really think about it any more deeply than that. But as you go along, what you’ll realize is your investors will become a critical stakeholder in your journey and in your path. And so it’s really, really important that you really respect them, like them and kind of want them to be part of this baby that you’re building. And not enough people said that to me in the early days, so I would give that advice as well.

Devika Garg

So Lizzie, you’ve been a banker, investor, founder, digital innovator, a mother, and also a marathoner. I was fascinated to know that you’re one of the three people from India who have run the Antarctica ice marathon, the 42 kilometers, Antarctica ice marathon, tell us a little bit about it.

Lizzie Chapman

It just shows that I’m a bit mad, because I trained for that in Mumbai. I remember the first, maybe a week after I moved to Mumbai, I signed up for it, which I think in hindsight was crazy. So I used to get up at two or three o’clock in the morning, and run from South Mumbai to the airport and back just to get the miles in at a time of day when it wasn’t boiling hot. So it was a bit of a labor of love. But no, it was an incredible experience. I love a challenge, as you can probably guess. And I love doing things that are out of my comfort zone. So when I signed up for that I’d only actually run one other 42km UK marathon, which I think was in Sweden. So it was a very easy run. But I thought, well, if I can do that, what could I do next? That would be a real challenge. So I did it. I loved it. It was just a great test of mind over matter as well. And I’m not a cold weather person. I hate the cold. It’s just part of I love living in India, I really get emotionally upset about cold weather. So for me going to a place that was minus 40 was about as uncomfortable as I could get. And that’s why I did it. I made some great friends. great experience.

Devika Garg

Sounds great. May you continue to follow your heart and have your mind to matter. All the best, wishing you and the team at ZestMoney all good luck in the world. Thank you for being in conversation with us today Lizzy, it was a pleasure talking to you. Thank you so much.

Lizzie Chapman

You too, thank you so much. I loved your questions and good luck.

Devika Garg

Thank you.

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