Fintech startup Cred will allow peer-to-peer (P2P) loans for its members. This is the first investment-focused product the three-year-old startup has launched, Kunal Shah, the founder and CEO of Cred told ET via video call.
Cred Mint, launched in partnership with non-bank LiquiLoansP2P, will allow users to ‘invest’ their savings in an equity fund, which will then be used to lend to other clients on the platform seeking personal loans.
Those who invest in the product will earn interest of around 9%, while loans will be disbursed at a rate of 12-13%, Shah said.
Cred will allow users to put between Rs 1 lakh and Rs 10 lakh of their capital for the fund
“As we studied user behavior on our platform, we realized that many of our members have lakhs of idle savings in their bank account, accumulating interest rates that are not even higher than inflation,” he said
Shah. “This is an erosion of wealth and as a community of highly trusted individuals we feel that P2P loans offer a low risk investment opportunity for one Cred member investing in another.”
P2P is a lending model through an online platform that matches lenders with borrowers.
While the returns on these investments are subject to repayment of the extended credit, most non-bank finance companies specializing in this category take the risk on their books and offer an interest rate.
LiquiLoans, LenDenClub and Rupee Circle are some of the licensed non-bank P2P loans in the
Shah said this was Cred’s first ‘community product’, among others, on the anvil of the
startup. The Bengaluru-based startup founded by Shah – a serial entrepreneur – wants to create an exclusive financial community for high-credit worthy individuals. Since its launch as a credit card payment player in 2018, Cred has dabbled in the e-commerce, loans, payments, and now investment segments.
“Around 25-30% of all credit card bill payments in India are made through the platform,” Shah said. “The retail business is doing well, and we have more than 2,000 brands. Our share of payments, which is young, is also growing 60% month-on-month.”
Cred, which launched its loan game in 2020 in partnership with private sector lender IDFC First Bank, said its loan portfolio is now at more than Rs 2,000 crore, with non-performing assets at less than 1%.
On Cred’s business model, Shah said: “Cred was designed as a community of highly trusted individuals. We monetize by cross-selling through two large constituents that are our business partners in – commerce and payments – and service partners. Is Google a search company or an advertising company? The question of how to make money is what defines you or what it solves for your consumers? ” In April, when he saw his valuation nearly triple in less than six months to $ 2.2 billion after raising $ 215 million in a round of shares co-led by new investor Falcon Edge Capital and existing investor Coatue Management.
According to media reports, the firm is also in talks with existing investors to raise more capital in a new round, which could nearly double the startup’s valuation.
Shah said that while there is “interest” among existing investors to infuse more capital, the talks are very preliminary at this stage and not binding. Cred raised its Series A round in August 2019 to a valuation of $ 450 million.
Its initial round of $ 30 million was one of the biggest views in the Indian startup ecosystem.
The company charges associated companies in its Cred Store, an e-commerce platform, a prescribed fee in exchange for higher commitments. It also charges its banking partners a commission cut for improving clients’ fiscal discipline for the new lines of credit available through the platform.
The startup has more than 1,300 member brands, including Samsung, Myntra, and Curefit.
It has incorporated around 3 million clients in the last two years.
Shah previously founded the e-wallet Freecharge, which was sold to e-commerce firm Snapdeal for $ 400 million in 2015, in what was one of the largest mergers and responses in the internet sector at the time.