Bengaluru-based fintech startup Cred that allows users to pay their credit card bills and earn rewards, is on its way to land into a unicorn club. The three-year-old firm is in the advanced stage of discussions to raise USD 200 million at a valuation of USD 2 billion, a report by TechCrunch said, citing sources.
This comes barely two months after Cred announced its Series C round of USD 81 million, when it doubled its valuation to USD 806 million. To date, Cred has raised about USD 256.6 million, as per the business intelligence platform Crunchbase.
Cred is backed by marquee investors including DST Global, Sequoia Capital India, Tiger Global, Ribbit Capital, and General Catalyst.
The latest round is expected to be financed largely by its current backers, the report added. If the talks go through, it will make Cred one of the fastest startups to attain a USD 2 billion valuation in the world’s third-largest startup ecosystem.
Cred was started in 2018 by serial entrepreneur Kunal Shah, who sold his former fintech startup Freecharge to e-commerce company Snapdeal in 2015 for USD 400 million. Shah’s new venture rewards credit card users with points that can be redeemed during their purchase on its e-commerce platform Cred Store.
It has partnered with over 1,300 brands such as Curefit, Myntra, Urban Company, OnePlus, among others that offer premium products for sale on Cred. It charges a fee to these partner companies promising an increase in user engagement. Currently, Cred has more than 5.9 million customers, as per the TechCrunch report.
There were 60.3 million credit cards in circulation in India as of December 2020, according to the data from the country’s central bank, the Reserve Bank of India. The top four banks in India–HDFC, SBI, ICICI, and Axis–control about 70% of the total credit card market.
According to Shah, Cred targets the top 15-20 million credit card spenders or “premium consumers” and lets users with high credit scores pay multiple credit card bills while offering them exciting rewards.
“The opportunity is to think about India differently, where there is a consuming class looking for more high-quality services. CRED was designed to be able to take a small audience and build for them, versus building for all of India and still do a poor job of it,” he said in an interview in mid-2019. “The premium customers are not interested in mass services like booking railway tickets. They want a more premium experience. Our goal was to focus on customers that can deliver value. As more individuals become affluent, we can include them in the customer base.”
The TechCrunch report, citing a note by analysts at Bank of America (BoA), said there are very few startups like Cred that are focusing on the high-end base and have taken a platform-based approach (acquire customers now and look for monetization later).
The BoA analysts believe that credit card in India remains an aspirational product and that the under penetration would likely ensure continued strong growth in coming years even though the form-factor may evolve, such as moving from plastic card to virtual card.
Cred earns money by charging merchants a marketing fee to participate on the platform, and upselling and cross-selling financing products for banks and other financial institutions.
“Our goal is to systematically help banks up-sell and cross-sell more. Because, if people are going to come to our platform to get personal loans, we want to be able to power banks on our system,” Shah had said in the interview. “This customer is usually very easy to give a loan to and to cross-sell and up-sell. So we want to become a platform where we can aggregate banks to come together and offer benefits to the customers, and make a revenue share model on top of that.”
