Kunal Shah's CRED aims for revenue through new product launches

Company backed by Sequoia Capital helps credit card users earn rewards for paying their bills

CRED, a credit card payment firm run by Freecharge founder Kunal Shah, is working to monetise its platform nearly 21 months after its launch.

The start-up, which is backed by Sequoia Capital and helps credit card users earn rewards for paying their bills, aims to leverage four products it launched during the lockdown to contain the coronavirus pandemic as its revenue streams.

CRED launched in April two lending products: ‘Rent Pay’ for users to pay recurring household expenses and monthly rent payments through credit cards, and a credit line which is offered at around one-third of current interest rates in the market in association with banks. The third product that was launched during that time was a brand discovery platform called ‘Discover’.  

"Both rent payment and credit line have worked out pretty well for us so far, despite their launch happening during the lockdown. Many banks are forthcoming to lend even during this testing times as our customer cohort is less likely to have income challenges," said Shah, founder and CEO of CRED.

"Historically, taking personal loans was a painful process in terms of friction and the absence of a fully digital process and lag in receiving the money. With the credit line product, one should receive the money in two minutes flat."

The CRED app, which is exclusive to people with credit scores of over 750, has over 3 million users. The company hopes to earn revenue by charging a fee for using Rentpay apart from revenue share from its credit line offering. It will also charge a fee from brands to list their products on 'Discover' platform where the users can spend CRED coins to avail discounts. Close to 120 brands have been marketed on ‘Discover’ since its launch in April.

According to its latest regulatory filings, CRED’s revenue in FY19 was nil and it burned Rs 64 crore. It operated only for five months that financial year.

Shah said, the company had made a ‘deliberate choice’ to focus on achieving scale than revenue generation which most internet-based business follow. "Internet business fundamentally has a different rule—they start with distribution, then upselling and crossing happens. Even Facebook did not monetise for the first 4-5 years," Shah said. “Sometimes expectations on a start-up is high as people compare it with successes achieved by the same team in the past.”

As the country is still limping back to normalcy from Covid-19 pandemic, credit card spends—a measure of discretionary spending— have rebounded to nearly 75 per cent of pre-coronavirus levels.

"There was a major depression in credit cards spends when the lockdown started. It hit as low as 40-50 per cent of what it used to be. But now it has recovered led by grocery bills, a crazy spurt in OTT subscriptions and increased the usage credit cards just to hold back physical cash in these uncertain times," said Shah. In order to reach the same levels as during pre-Covid time, Shah said, adding it will take some time until major categories such as travel and vacations open up.

Shah said that the consumers were not fully aware of the moratorium option extended by Reserve Bank of India. "A lot of people think one does not need to pay for six months and assume it is a pause on interest levied as well but the problem is your interest is going to be heavy for that period. It's a scary situation as some cards have 45 per cent as annual interest rate," he said.

RBI allowed lenders to give an option of pausing loan repayments to individuals and companies for a six-month ending in August. CRED said it constantly sent in-app and mail notifications to users encouraging users to pay-off the pending bills on time and not opt for the option unless it was necessary. Shah estimated around 20-25 per cent of credit card users had opted for the moratorium as an industry average but less than 10 per cent have gone for the option at CRED.