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The covid-19 crisis saw credit card use falling drastically with the lockdown restricting the movement of people and avenues to spend. CRED, which incentivizes customers for paying credit card bills, is however witnessing a sharp recovery and expects to clock pre-covid volumes by September, as the festive season kicks in. In an interview, as part of Mint’s Pivot or Perish series, Kunal Shah, co-founder and chief executive officer of CRED, said the pandemic has prompted consumers to move from cash to card transactions, and will also lead to more efficient and profitable startups in India. Edited excerpts:

What has been the impact of covid-19 on your business?

During the covid-19-led lockdown, we saw spending on credit cards dip by almost 40%, especially with categories like travel, vacations and fuel taking a big hit. Now, the impact has reduced to 20-25%, and witnessing a quick recovery as individuals are using credit cards to pay for groceries, as well as for larger purchases. Recovery will also be aided by the festive season. We expect credit card spends to be at pre-covid levels by September on the CRED platform.

Our consumers weren’t impacted much by covid-19, because most haven’t lost jobs or income, while avenues to spend have reduced. CRED’s focus continues to be on the top 25 million Indian consumers, who proved to show profit pools in the past, versus going behind the next 300 million users.

What product pivots did you consider?

Internally, we noticed that a lot of consumers were struggling with liquidity, and needed additional buffer for medical emergencies. Hence, we thought of readily available loan products, which doesn’t require one to go through the physical processes. Assessing the market situation, we chose to launch CRED Stash, our credit line, and CRED RentPay, earlier than we anticipated. In fact, we shipped RentPay in just three weeks, since we realized that after credit card bills, the second largest expense is paying rents. Hence, we worked to free up liquidity by allowing users to pay rent through their credit cards. We also launched our Discover platform in April for young consumer brands to connect to users. Eventually, we are creating a gated club of users, wherein multiple parties will have benefits to stay in the ecosystem. Over 118 brands have been part of Discover since launch, including 66 direct-to-consumer brands.

How do you see monetization happening on CRED?

Internet businesses think about distribution first, and we have 3 million customers already with credit scores of over 750 (median score is 830) in under two years. Now, RentPay, Stash are the revenue-making part of the business, along with e-commerce platform Discover and our brand platform WIN.

We make revenue on Discover through listing fees, and follow a commission-based model on WIN on lead conversions, and other metrics. WIN employs gamification to create skill-based games, which build engagement among members, and 35 brands have signed up already. We are also helping brands, some international, to engage with consumers by creating immersive experiences. The same goes for banks, which want to cross-sell credit cards or financial products to our customers. CRED’s innovation is in creating distribution, and we have a runway of 2-3 years and will continue to build newer products.

Has covid forced you to look at profitability over growth?

Internet companies don’t have the luxury to think about profitability, with the real question being distribution. Look at the early days of Amazon or even Jio, unless, distribution is coming at an insane cost of burn. Covid will cause businesses to find creative and frugal ways of growth versus spending cash for customer acquisitions. At CRED, we thought of that by incentivizing customers to pay credit card bills. Rather than spending extensively on marketing, we have been partnering with banks, which are sponsoring CRED’s solutions, and making us an official partner. Hence, businesses will have to think of more creative methods to put the word out.

How do you see managing capital versus growth playing out?

At such times of uncertainty, it is best to lay low and survive the crisis. Alternatively, this is also a time to take bold creative bets. In a year’s time, we will see way more profitable startups because they are becoming efficient and improving unit economics across many new categories.

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