Why Cred is betting on India’s prosperous future – says founder Kunal Shah

Kunal Shah, founder of Cred, has stuck to his strategy of catering to the affluent, focusing on those with a CIBIL score of 750 and above. Despite questions about the potential limitations of this approach, Shah sees immense value in focusing on this segment.

Speaking to CNBC-TV18, Shah highlighted the growth in the number of credit card users in India, which has grown from less than 20 million to an imminent 100 million mark. Shah believes that as India moves towards becoming a wealthier society, this cohort will continue to expand, which justifies Cred’s focus on these high net worth individuals.

For Shah, focus is the cornerstone of Cred’s success. He argues that trying to cater to too many customer segments dilutes the quality of service, causing a company to end up “not being for everyone.” By focusing on a specific, affluent demographic, Cred can deeply understand and address the unique needs of its users. Shah contrasts this approach with his previous company, Freecharge, which was designed for the masses. He notes that while there are plenty of fintech innovations for a broader audience, the affluent segment is underserved in terms of premium, hassle-free digital experiences, which is where Cred comes in.

For Cred, growth isn’t about amassing a large number of users, but about maximizing value per customer. Shah explains that Cred’s customer base has been growing steadily, reaching about 14 million, up from 8 million to 10 million just a few quarters ago. However, rather than chasing pure volume, Cred is focused on increasing spend per customer, a metric where Shah believes Cred significantly outperforms other fintech platforms.

Below are edited excerpts from the interview:

Q: What is Cred really about? You started out as a rewards platform to incentivize people to pay their bills, which is a big part of your business. But then you acquired a wealth management company, you offer travel experiences on your platform, you have e-commerce and automotive services. So what is Cred really about? And just so we can get a better handle on the financials, what is the revenue split between all of these businesses?

Shah: Cred is actually a pretty simple business. We started with a very simple mission: to recognize and reward creditworthy people for their good financial behavior. When we started Cred, we focused on credit card bill payments because we noticed that even though a very small percentage of Indians actually have a credit card and use it every month, there seems to be a challenge in terms of diligence in payments, ensuring that you don’t incur interest charges and all that. We wanted to make it extremely easy to target this group of customers, who also happen to be the most affluent group of customers in India.

We used that to grow our distribution. But as we focused on those customers, we started building all the services that they wanted, which most other platforms aren’t able to offer because they’re trying to serve a broad audience.

In fact, because we focused on the top 25 million households, the number of unique credit card customers each month is about 25 to 27 million. So we wanted to focus on them and create more products for them.

For example, everything you talked about is because I have this customer base, should we potentially look at their lifestyle and say a store or a travel? And what we’ve been able to do is we’ve been able to attract a high-quality audience, we’ve been able to get great deals for them in-store, great deals for them on people trying their new stuff. For example, our store doesn’t have search because it’s a discovery platform for a lot of new brands that are launching with us. And a lot of times, people discover great D2C brands because they show up first on Cred.

It’s the same with travel, many hotels are able to offer us unique opaque offers because they serve a certain customer instead of creating a more public offer as such.

Q: But you consider yourself a fintech?

Shah: I just attended a fintech festival. I would say we are more of a show for the audience, a platform for creditworthy customers that caters to all their needs.

Internet companies, unfortunately, aren’t really labeled that way. So far, it’s been like saying we’re defined by how we make money. That’s not how life should be. We do multiple things, we make money on a few things. A lot of times, we’re much more than that and we make money through fintech.

Q: What is the distribution of revenues between these different activities? Which branches are experiencing the fastest growth?

Shah: We are going to be six years old in November. We started our monetization a little over three years ago. Our initial intention was to focus primarily on the payments part of the revenue, which was the core of the business, which we did through a lot of merchant partnerships. We also did BFSI distribution. We do personal loan distribution and insurance distribution. And we plan to offer more and more services that any bank or insurance company can offer to these customers. But what we are doing is trying to create a much more seamless and magical experience in working with them.

Our goal is that these customers don’t like to be bothered too much. The first principle that we adopted, let’s say, for doing business in the personal loan space is to never call the customer. And what happens is that I’m not against taking out a loan. I’m just not interested in 25 calls and 50 people bothering me trying to sell me something. As a principle, we try to address the audience that is really interested in financial services, but also in a more fluid and artisanal way.

Q: You have not given us the income breakdown as such.

Shah: It’s largely on the fintech side. We have launched only a few revenue products. We are starting to do more things. We recently launched car insurance on our platform, we are working on personal loans. We are also working on payments. We have a store platform, so it’s early days. On the revenue side, like I said, we are a three-year-old company with the burden of a 20-year-old company with the expectations of the things that we are in. But I think we are focusing on the right customers. Fortunately, those are exactly the customers that are monetizing well across all platforms. If you look at all the reports or the public markets, the affluent segment in India is spending quite well and I think that is a growing segment. I think for us, that is the area that we are focusing on.

Q: You never wanted to rethink this strategy of focusing on this affluent clientele – Cibil score of 750 and above. These are people who probably already have multiple bank accounts, people who probably already have many fintech applications that they use. So, do you think that your customer growth will stagnate if you continue to focus on that? Are you going to rethink it or do you think that Cred will become like that?

Shah: When we started our journey, there were less than 20 million credit cards in the country. Today, we are going to reach 100 million soon. We all have to believe that as we move towards Viksit Bharat, there will be more affluent customers than less affluent customers. If you take the time to think about the future, this group will continue to grow.

Why should we focus on this cohort? I think focus allows companies to do the right things. Often times when we try to focus on so many customer segments, especially as an internet company, we end up not being all things to all people because we’re trying to be all things to all people.

I think when you focus on a few things, you can really get to the bottom of what those users need and focus on them. For example, if I’m trying to create an international holiday experience, it’s not going to make sense for me with 20 million customers who travel quite frequently. So the idea is that when we focus on that segment, and I’m not saying there’s enough fintech innovation going on, my old company, Freecharge, is built for the mass market. It was one of the first payments companies back in the day. We just think that segment is well served in terms of the services that are offered to them, but not in the way that the experience is offered to them. The reason is that they don’t want to talk to someone on the phone. They don’t want to go to a physical location to work. They would like their life to be completely dedicated to their phone and, ideally, never get a call.

Q: How fast is your customer base growing? We know you have about 14 million customers. Has that number grown a lot?

Shah: The growth is pretty good. A couple of quarters ago, we were in the 8 million to 10 million range. And we have a national cap on how many customers we really want to reach. I think the way to think about high net worth businesses is it’s not customer growth, we’re not chasing those hundreds of millions of customers. It’s about spend per customer. The growth is pretty good. We think relative to most fintech platforms, we’ll probably be at 10x, 12x in terms of, say, revenue per customer, and I think that’s the metric we’re really going to focus on.

Q: So at what rate, again, is that revenue per customer growing?

Shah: I would say that even though we just launched a couple of monetization products, we’ve seen tremendous growth in revenue per customer. We’re constantly adding new products that serve them. What people misunderstand is that when you try to build multiple services too quickly, you need the user to evolve and understand things as well. For example, we launched a product called Garage, which allowed you to easily manage your cars on our platform. It was an unusual product that came in and said, “Configure your car, check your chalan and insurance and all of that in one place.” And suddenly we have about six million vehicles on the platform that are now managed. And then we’re gradually launching insurance on top of that and building other things on top of that. I think there’s a very unique tendency for internet companies to build distribution and engagement first and then add monetization on top of that.

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