What next for Cred: Lifestyle or Lending?
Lets start this one with a story.
An entrepreneur looked around and realised:
People had multiple credit cards
Paying bills of multiple credit cards was a hassle
People use credit cards because they love rewards
These insights were enough for him to launch a credit card management platform wherein people can manage their credit card bills and get rewarded for paying the bills. Everyone loved rewards and hence the platform took off smoothly.
The platform had access to all the user data and could identify 2 types of users: one, those who had money and used credit card for rewards/ offers and second, those who didn’t and hence needed loans. So they said “why not help the lender meet the borrower?” and that’s how P2P lending started.
There was more demand for loans than what could be met through P2P lending and hence the platform onboarded some loan suppliers (read: banks and NBFCs) and started lending through them as well.
By now you must have guessed the platform I am talking about.
And I am sure our answers are different!
Innovation starts from China!
51 Credit cards started its operations in China in 2012 providing personal credit management services primarily to credit card holders through the 51 Credit Card Manager App. The experience was smooth and rewarding and hence company went on to grow from nothing to managing 106.3 million credit cards of 62 million customers in 2017. On the way, they launched P2P lending and Personal loans.
From their Prospectus published in 2017 in HongKong Stock exchange:
Through our credit card management platform, we have accumulated a vast number of highly valuable and credit active users with established credit profile. We took our business model into the next level by strategically entering into online credit facilitation and investment market in 2015. Within two years, our online consumer finance marketplace became the largest online consumer finance marketplace targeting credit card holders, as measured by loan facilitation volume in 2017, according to the Oliver Wyman Report.
We have accumulated a wealth of valuable credit data through our credit card management services for tens of millions of users, which include credit card transaction records from different banks, consumption history across different use cases, and repayment data through users’ life cycle.
Building upon the vast amount of credit data generated from our credit card management platform and the high volume of transaction data from our consumer finance marketplace, we have independently developed a comprehensive credit analytics system, iCredit, to enhance our risk management capabilities.
Once the data analysis layer was completely ready, the company went on to launch credit card application platform wherein user could compare and apply for credit cards provided by partners.
Eventually the company partnered with multiple smaller banks of China and started issuing co-branded credit cards.
Since April 2017, we have developed in-depth cooperation with several medium and small-sized banks, who desire to expand their credit card businesses, and offered our co-branding credit cards with them. We provide services to them in the areas of data application, credit analytics and risk profiling, through which we are able to share the income generated from the co-branding credit cards with these banks for a number of years. As of December 31, 2017, the cumulative number of co-branding credit cards issued was 100,905 and 67,403 of them were issued in the fourth quarter of 2017. We believe that our credit card technology services business has sustainable growth potential.
Same but different
Cred’s journey bears uncanny resemblance to that of 51 Credit cards:
2018: Kunal Shah launched a Lifestyle business with the first product being a Credit card management platform
2020: Launched Cred Stash (now called Cred Cash): Personal loans through partners
2021: Launched Cred Mint: P2P Lending
On the way, the company also acquired/ invested in multiple other companies which equipped Cred with a complete lending stack:
Acquisition layer: Through its 3 different apps, Cred today caters to 3 different types of audience: Prefr (Masses), Cred (Mass affluent + Affluent) and Kuvera (Affluent)
Data layer: The company has/ will have access to data from varied sources:
Transaction data: Available from your credit card statements and SMS data
Credit data: Fetched from your credit reports
Bank data: Will be fetched through account aggregators (Cred has applied for the license to be a Account aggregator NBFC)
Wealth data: Will be fetched through account aggregator; also if and when they integrate Kuvera
Analysis layer: Cred acquired CreditVidya in 2022 which has created the decisioning engine allowing any lender to take decisions
Underwriting layer: Cred has minority stakes in Liquiloans (P2P NBFC) and Newtap (previously Parfait finance- NBFC). Further it has partnered with banks to provide loans to the user base
On the back of this stack, Cred launched personal loans wherein they have had significant success. They did launch Travel, Cred store, UPI and many more features too but most only help in engagement. Their monetisation strategy continues to follow the foot steps of 51 Credit cards and hence no points for guessing what they would be launching next.
Credit cards are the new sexy
As per two people aware about things happening at Cred, Cred is working on launching a co-branded credit card which makes all the sense considering Cred today has a captive user base and large amount of data about the base to determine:
Creditworthiness of an individual
Propensity to take a loan/ credit card
Offers/ rewards necessary to make pitch exciting
These would enable Cred to pitch to the right customer, at the right time and with the right offering.
Would they be successful? Only time would tell but one thing is for sure: Cred might call itself as a lifestyle company but like most other Fintechs out there, Cred is also a lending company.