Zomato, a major player in the Indian food tech industry, has decided to exit the financial services sector. Zomato’s wholly-owned subsidiary, Zomato Financial Services Limited (ZFCL), announced the voluntary withdrawal of its application to operate as a non-banking financial company (NBFC) with the Reserve Bank of India (RBI).
The decision to withdraw from the financial space comes at a time when the RBI has been intensifying its crackdown on NBFCs and fintech companies due to lapses in governance and regulatory compliance. Earlier this year, the RBI issued draft guidelines to regulate online payment aggregators, mandating physical KYC (Know Your Customer) verification for merchant onboarding. This move has added significant compliance burdens on new entrants in the financial sector.
Reevaluation of business focus
In its exchange filing, Zomato stated that it no longer sees the lending and credit business as a viable opportunity. This follows Zomato’s earlier decision in May to write off Rs 39 crore invested in its wholly-owned subsidiary, Zomato Payments Private Limited (ZPPL). At that time, Zomato had relinquished its payment aggregator licence, acknowledging the competitive disadvantage against established players in the payments industry.
“We do not see ourselves having a significant competitive advantage against the incumbents in the payments space and hence we don’t foresee a business in payments space as commercially viable for us, at this stage,” the company had stated.
ZFCL was incorporated in 2022 as part of Zomato’s broader digital lending plans, following the incorporation of ZPPL in 2021. The exit from the financial services space marks a significant shift in Zomato’s business strategy. By stepping back from its financial ambitions, Zomato appears to be refocusing its efforts on its core food delivery and restaurant discovery business, areas where it has established a strong market presence.
Narrowing space
Zomato’s exit from the financial space comes amid a broader tightening of regulations in the fintech sector by the RBI.
The withdrawal signals a cautious approach by Zomato, prioritising sustainability and core business strengths over diversification into heavily regulated financial services. It also reflects the broader trend of fintech companies reassessing their business models in response to evolving regulatory actions.
