CRED wants to be a lifestyle-first company, not just a fintech app, says founder Kunal Shah

About to turn five this November, CRE D’s metamorphosis from a payments-for-rewards app is on display. For its exclusive club of 15 million users with a credit score of over 750, the app now hosts Periscope (a lifestyle and culture magazine), Escapes (‘curated’ travel deals) and Store (products on offer for the crème de la crème of Indian consumers). Shah claims the shopping platform is generating sales equivalent to what D2C brands see on other maj or e-commerce marketplaces.

With these offerings, CRED is trying to build what its cohort of customers value. "As much as we love fintech, the average consumer hates it because money causes anxiety. They think of a financial services app like a petrol pump—go there quickly, fuel your car and leave”, Shah explained.

In Shah’s view, the lack of engagement is what’s hurting the cross-selling opportunity for India’s fintechs.

"Cross-selling will happen at platforms that have the highest amount of engagement, highest amount of time spent and where the customers feel joy," he said. Shah, citing the example of TikTok, which has gone beyond being just a short-video platform, with a target of $20 billion in e-commerce sales for 2023.

“So, should we focus only on financial services? The answer is no. Should we make money on cross-selling? In financial services, we anyways cross-sell for banks, non-banking financial companies (NBFCs) and insurance companies. We just want to keep building a superior engagement platform that allows for seamless offering of other services now," he asked.

If CRED is trying to build a product to cross-sell to a growing credit-worthy, affluent and discerning user base—the top 2-3 percent of India or 15 million out of about 80 million credit card holders in India—in whatever direction the company will look, it will face competition. From e-commerce marketplaces and video streaming sites to BNPL apps and fintech rivals PhonePe and Paytm—all vying for the attention of the same consumer.

Shah admits, India—with its 650-700 million internet-powered smartphones—is a global farm for daily active users (DAUs) or monthly active users (MAUs), but when it comes to monetisation, “concentration of profit pools is still skewed towards the top 30-35 million customers."

“The truth is: while we may all love to build for India, the market concentration of revenue and profit pool (will not make it possible yet)," he said.

Pointing out that India has about 60-70 million people who file income tax returns, with only about 30-35 million paying taxes, Shah added, "These 35 million households contribute to about 80-85 percent of all savings accounts balance.”

“India is a huge country, where we should see growth across the cohorts, but we don't see it yet...India is still going through the per capita income growth challenge," he concluded.

One of the unicorns in the record breaking year of 2021, surfing on the pandemic-led digital wave, Kunal Shah’s startup has raised nearly $800 million since inception in 2018 and its current valuation stands over $6 billion.

Now, as the goalposts shift within the startup ecosystem towards profitability, CRED finds itself in a tough spot after spending heavily on marketing during the boom time. While the company is yet to file its FY23 earnings, the loss stood at Rs 1,280 crore with revenue at slightly under Rs 400 crore in FY22. The cash burn: about Rs 4 to earn Rs 1 of operating revenue.

The monetisation challenge has led CRED down many paths over the last two years.

Money has also gone into a slew of strategic investments or acquisitions, which include Parfait Finance (for its NBFC license) and half a dozen startups, offering credit underwriting, expense management, micro-savings, peer-to-peer lending and personal finance solutions.

While the NBFC arm has been integrated to front load CRED’s Buy Now, Pay Later (BNPL) offering ‘Flash’, there were troubles elsewhere. At least 150 employees were fired at Happay, an expense management and corporate prepaid credit instrument platform, which was acquired last year.

In the last 12 months, Cred’s growth strategy has been geared towards balancing its ambitions while working with a niche user base. The foray into UPI—which although propelled CRED to become the fourth-most used app for payments on the interface—came rather late in the startup’s journey, leading to speculations that it is looking for fresher and larger grazing pastures. For Shah, credit-on-UPI, now approved by RBI, is the big opportunity, which he believes will create the next cohort of affluent Indians.

Reiterating that the focus remains on the top bracket of the country, Shah referred to Freecharge, which he sold to e-commerce marketplace Snapdeal, who in turn shuffled the unit to Axis Bank and said, “My previous company was built for all-of-India, but CRED was built for those on the other end of the spectrum.”