CRED Cranks Up The Loan Machine

When Cred crossed INR 2,400 Cr in revenue last year, it finally sent a message to India’s fintech ecosystem. The company’s strategy of targeting just the top 1%-2% of the fintech customer base was finally paying off.

Over the past 18 months, the Kunal Shah-led startup launched several products that sought to increase user engagement on the platform, but the latest changes are all geared towards monetising this top 2% of the fintech user base.

Like this past week, when CRED did the most CRED thing, launching secured loans with a so-called Svalbard release. This ‘release’ also revamps the credit cards experience and adds a credit score history feature.

Where does this place CRED among the front-runners in the fintech space — Paytm and PhonePe? Before we answer these, a look at the top stories from our newsroom this week:

• Zappfresh’s IPO Cook Book: A lot has changed since SEBI’s regulations delayed Zappfresh’s listing dreams last year. The meat delivery startup has been rolling in profits unlike its peers and now it’s looking to capitalise on the global opportunity after making a mark in India
• The Dilemma In Gaming: In the absence of a uniform, pan-India regulatory framework, most gaming companies are still in a state of limbo. The cry for centralised regulation in gaming has only turned louder, as companies deal with disparate legislation at the state level
• Rebel Foods’ 15-Min Gamble: The race to reach a netizen’s doorstep with a platter full of goodies at unprecedented speeds is as real as it gets. Amid this, Rebel Foods, too, has stepped into the ultra-fast food-delivery lane with QuickiES.

What’s The Svalbard Release?

The Svalbard Release is meant to evoke imagery of the Northern Lights, where the Arctic night sky changes in an instant from dark to a colourful delight.

Where other companies go for a simple press release, CRED launched the secured loans product Cash+ with a big media event in Bengaluru. Plus, CRED’s new product launches and feature drops are starting to sound more like Apple macOS upgrades (macOS Sequoia, anyone?) rather than just another fintech app feature.

It’s not the first time someone has compared CRED to Apple and it won’t be the last, even though both are worlds apart. But CRED’s approach to catering to the premium segment of the market is similar to Apple’s, even though Android phones have the larger overall market share.

For CRED, it’s not about the market share or hundreds of millions of users but about getting the right users, ones that can be monetised.

The Kuvera Effect

In February last year, CRED made its long-awaited push into investments with the acquisition of Kuvera. Unlike Zerodha or Groww, Kuvera is a free investment platform offering direct plans at zero commissions.

Instead of fees from individuals, Kuvera earns revenue through B2B services i.e. working with large investment houses, and market data analytics.

In a recent interview with The Arc, Kunal Shah revealed that Kuvera’s average AUM (per user) is INR 15 Lakh, which would allow the company to lend around INR 7 Lakh per user through the secured lending product.

Shah also believes that there is a huge untapped market as far as secured loans are concerned, with just 1.5% of the total AUM of mutual funds in India being pledged as collateral for loans. This is the audience that Shah & Co are chasing.

The Kuvera acquisition, which has thus far not shown major revenue traction, is essentially being used to learn about investor behaviours including the fact that even those customers with a sizeable MF portfolio would be taking unsecured personal or business loans.

For CRED, the problem comes down to the friction in the customer experience in secured lending, where a lot depends on negotiations with banks and NBFCs over collateral and interest rates. Shah claims by standardising interest rates and a product that enables a 90-second experience, CRED might have an edge over others also venturing into the secured loans segment.

Super Apps Turn To Secured Loans

One could say that the fintech super app space is one of the most competitive battles in the Indian startup ecosystem. From Paytm to PhonePe to Google Pay to Groww, and even Flipkart and Jio Financial Services, everyone wants a piece of this action.

PhonePe invested billions of dollars in scaling it up, just like Paytm or Google Pay, Amazon Pay or others. While the market is undoubtedly large, competition makes it hard to acquire and retain users, which is where perhaps CRED is looking to differentiate itself by going after the cream of the market — customers it believes will delight in the CRED product experience more than its rivals.

In May last year, PhonePe ventured into secured lending products on its platform in partnership with banks, non-banking financial companies (NBFCs) and other fintech firms. The company is looking to capitalise on its massive install base (535 Mn registered users) with loans against mutual funds, gold, bike, car, home and education loans.

Ever since the troubles for Paytm, Navi and DMI Finance in 2024 vis-a-vis the RBI, there has been an industry-wide transition in the digital lending space. Across the board, digital lenders have looked to diversify their lending partnerships with multiple NBFCs and registered lenders furnishing the funds. With four NBFCs being asked to stop lending operations, many fintech companies would be left scrambling for partners.

In particular, the RBI’s claims that such platforms have been charging usurious interest rates means that other lenders would feel compelled to reevaluate their lending partnerships in the short and medium term.

One side effect of these changes is that lending platforms are finding it harder to raise funds and acquire new customers. This is why super apps — built around the high-volume UPI payments and bill payments businesses — have something of an advantage over pureplay digital lending startups.

Planning a super app and launching products is one thing, but scaling it up will be just as critical for CRED. However, unlike other platforms, CRED’s marketing strategy has been about treating its users as members, while offering products in the form of experiences.

CRED’s Eyes On Profits

Those leading CRED believe the company has now successfully created an Apple-like premium niche and ecosystem. But this has not yet translated into that other very Apple thing: profits.

Shah and Co have always said that building the right products in an efficient manner leveraging technology is the only way to get to meaningful profitability. It’s this slow and steady approach that has baffled many CRED observers in the past.

Now the company is also speaking with conviction of hitting breakeven by the end of FY26.

CRED’s revenue grew 67% YoY to INR 2,473 Cr in FY24 and operating loss reduced 41% YoY, driven by a 40% decline in customer acquisition costs and a 36% decline in marketing expenses.

However, net loss rose 22% to INR 1,644 Cr in the same fiscal year from INR 1,347 Cr in FY23.

As per a Fitch credit ratings note, the company’s management estimates operating loss to more than halve in FY25 and reach close to INR 300 Cr, nearing EBITDA breakeven.

The Fitch report also revealed that the number of monthly transacting customers on CRED crossed 12 Mn users as of December 2024 (9MFY25). With its FY24 disclosures last year, CRED claimed that  its MTU had increased by 34% YoY, along with 58% increase in monetised members.

As of FY24, over 35% of CRED’s MTU base engaged with three or more products, and more than 90% redeemed rewards, including cashback and vouchers, on a monthly basis.

Starting with credit card payments, CRED has added ecommerce, UPI, travel bookings, FASTag, motor insurance and now secured loans — the focus is clearly on higher user engagement. Even the launch of features such as credit score history, CRED Money and others are super critical in order to keep users coming back to the platform.

This has definitely pushed CRED closer to PhonePe and Paytm — the two largest fintech companies by revenue. As we saw PhonePe capitalised on Paytm’s woes in 2024 with a massive campaign to onboard merchants and customers. The IPO-bound company is likely to dethrone Paytm on the top of the fintech revenue charts by FY25, as seen in our analysis in the past.

In the same vein, the bigger emphasis on lending could actually be a major revenue multiplier for CRED.  Now the question is whether profits will follow?

Sunday Roundup: Startup Funding, Deals & More 

• Funding Turns Sluggish: Amid a bearish market, investor sentiment towards the Indian startup ecosystem was down. This past week, startups cumulatively raised $88.3 Mn via 16 deals, 43% lower than the previous week

• super.money Buys BharatX: Flipkart-backed super.money has bought the BNPL fintech startup BharatX to strengthen its credit offerings in the checkout financing space. Founded in 2019, BharatX enables embedded credit on consumer-facing platforms.
• How SaaS Bets Are Evolving With The AI Boom: Stellaris Venture Partners believes that with the AI boom, SaaS is being put through the churn. Therefore, it is shifting its investment focus from horizontal to vertical SaaS while keeping an eye on AI-powered productisation of the services economy.
• Govt’s INR 30 Cr Startup Challenge: DPIIT has partnered with VC firms to offer financial support and mentorship to innovative startups across 11 key sectors, including AI and deeptech. The Startup Maha Rathi Challenge is part of the second edition of Startup Mahakumbh.
• CBI On GainBitcoin Scam’s Tail: The agency has seized cryptos worth INR 24 Cr after two-day search operations across 60 locations in connection with the ongoing investigation into the crypto scam, which bilked victims out of INR 6,600 Cr.