Consumers need to gradually feel the need for products, rather than the platform bombarding them. We are playing a long game, says Kunal Shah, Cred founder
Three-year-old Cred, which saw its valuation grow almost three-fold to $2.2 billion this year, is now launching peer-to-peer (P2P) lending for members on its platform. The Bengaluru-based fintech company, which began its lending journey in April last year with its credit-line product, Cred Cash, is betting big on the lending segment.
Cred is also rumoured to be raising fresh funds, at a higher valuation, which the company denies.
The company’s monetization strategy has been questioned in the past. However, Cred founder Kunal Shah says in an interview that the focus for the company continues to be on finding the right product-market fit for its business lines, as it focuses on driving superior customer experiences.
What is the rationale behind launching P2P lending on the platform?
We have overall built a good quality loan book of more than ₹2,000 crore in a little more than 12 months. In continuation of that we thought we should launch our first community-based product. Cred always wanted to be a community and we waited for the platform to reach a certain scale before we did that.
So we have launched our P2P lending product called Cred Mint. We realised that most of our members have lakhs of rupees lying idle in their bank account, which is not earning them any major outcome. So the idea was to build an inflation-beating product where (Cred) members can earn 9% interest by investing in other Cred members. We have partnered with LiquiLoans for this product.
Our P2P lending product is focused on the higher income segment where members invest anywhere between ₹1 lakh and ₹10 lakh and simply withdraw this amount, at one click if needed.
At present, credit card revolving demands an annual (interest) percentage rate of 36% to 45%. So it makes sense to give these personal loans at 12% to 16%. We will roll out Cred Mint very slowly, because we do not want to compromise on quality.
By design, Cred’s focus is to create the highest quality loan book in the industry.
With lending being in focus, do you see Cred also acquiring a non-banking financial company licence?
A true platform needs to enable multiple parties to win, rather than trying to compete with all of them. It makes it harder if you are going after every opportunity and doing everything.
Cred’s principle has always been to be a platform-enabler, where discovery and consumer experiences are good. We will remain largely a platform and ensure that experiences for our customers are good.
How are you looking at your monetization strategy?
We don’t want to talk about our revenues, but it has done much better than our expectations. We were conscious about first establishing a good product and then optimizing for monetization. We have kickstarted our monetization journey with Cred Max, (which allows credit card holders to pay for rent and school fees used-cases for a small transaction fee) and Cred Cash (instant credit-line), as well as Cred Pay (payment product) and Cred Commerce.
These are early journeys and we have seen a lot of traction for these products. Our commerce offering (Cred Commerce) has 2,000 brands. Pay is growing at more than 60% month-on-month and the Max product is used by 600,000 customers.
We want to establish the right fit for these products before we decide on any strong direction for them. If you have the right customers, cross-selling is easier.
With growth, is Cred’s focus simultaneously also on profitability?
Considering the customer segment Cred targets, it is easy for the company to reach a certain scale and profitability. However, our goal is to have the right distribution first. Consumers need to gradually feel the need for these products, rather than the platform (Cred) bombarding them. We are playing a long term game.
Considering the growth and funding cycle, will Cred be raising another round this year?
We have always had interest, but we will raise capital when we see the need to do so. Since the start, investor interest has been consistent and we have been very fortunate because of that. Most of our rounds (in the past) have been done by internal investors.
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