Kunal Shah, co-founder of Freecharge, became India’s start-up poster boy when he sold the business to Snapdeal at an astounding $400-million valuation. But what made him the poster boy in the fintech world was CRED’s Mercedes Benz advertisement. It was so popular that people would watch it with rapt attention only to understand how paying credit card bills could get Mercedes to their garages. What was the company up to? — this was the question in everybody’s head. Ironically, nearly five years since, that question is yet to be answered.  

Founded in 2018 as a rewards platform for credit card payments, specifically targeting elite customers, CRED had the potential to create a niche for itself. But in the past five years, it has moved a long way, to reposition itself as a volume guzzling fintech super app model. Shah is adding more products to ensure that no stone is left unturned in the bid to ramp up revenue accretion.

In the last 10 months, CRED has launched a slew of varied products, such as tap and pay, CRED flash (BNPL offering), CRED escapes (luxury travel), and its latest — CRED Garage — a vehicle management platform.

According to reports, the company may be eyeing Kuvera, an online wealth management platform, which would give it an entry to the lucrative equities and mutual funds segment. Meanwhile, it made a grand splash with its foray into the garage business.

Interestingly, in its FY23 financials, the management made an interesting statement — that prudent financial behavior is becoming a habit for the top 1 per cent of the population and is helping CRED to post strong financial performance. But is the 1 per cent population still CRED’s target?

What is cooking?

Total credit cards issued almost touched the 100 million mark in August 2023, compared to 57 million three years ago, clearly suggesting that CRED’s primary audience of premium credit card users is becoming a less premium.

The fintech major largely relied on these premium users for growth and revenue, but it has also added vehicle management, services e-commerce, and luxury travel bookings to ensure it doesn’t cede space in the payment business. Travel and e-commerce capture a big slice of credit card spending.

Here again, there are two things for which data isn’t available — the stickiness of CRED’s credit card customer base, and how it effectively contributes to the bottomline without the need for incentivising the product.

Media reports suggest that CRED is looking beyond exclusive focus on premium D2C products. It has its eyes set on the high-volume e-commerce business.

Lending and payments

CRED also wants to ride the upcycle in the credit business. It plans to cater to consumers who are new to credit and seek to go beyond personal loans for its users by offering consumer durable loans and checkout finance. In short, replicate the classic fintech model.

To do so, CRED needs a lending vehicle because it doesn’t have a fintech and will lean on its promoter Kunal Shah’s Newtap Technologies, a NBFC promoted by him. Newtap will be the manufacturer of credit and CRED, its distributor. With laws on digital lending pretty much codified, it’s a good business to be in, though it doesn’t gel with the original ‘elite’ focus. But here’s the catch. Newtap is in the process of fund raise estimated at $50-70 million. It could be a combination of debt and equity. But the RBI citing ‘corporate governance’ and ‘management’ issues didn’t okay CRED’s attempt to increase its stake in the NBFC from 23.6 per cent. CRED’s aspirations in the financial space will be directly dependent on Newtap’s ability to raise capital.

CRED is also trying to position itself as an all-in-one shop for payments. Though a late entrant, it has secured the fourth position among the most-used UPI apps, behind PhonePe, Google Pay and Paytm. But in absolute usage, it’s far behind. UPI transactions touched the 1,000 crore mark in August 2023, of which CRED processed 8.5 crore transactions. In a segment where despite volumes players aren’t making money, thin numbers barely move the needle.

Yet, CRED’s confident. Its average monthly transacting users perform around 20 sessions on the platform, including credit card bill payments, utilities, travel, shopping, money transfers, and merchant transactions through UPI. With plans to go public, will it feed CRED’s profits?