Cred forays into lending, to offer flexible credit line

Bengaluru-based Cred is foraying into lending in a partnership with a bank to assist its customers in times of this financial stress arising out of the nationwide lockdown. To start with, the company is doing a pilot of the lending product for a select set of its customers which is set to begin in the next three to four days.

“We are looking to offer some bit of financial confidence to our customers by offering a flexible credit line at interest rates which are less than one third of a credit card mainly to offer some cash in their hands to help them manage in these tough times,” said Kunal Shah, the founder of Cred.

Explaining the product Shah said that the app would act as the frontend to acquire and manage the customer while the loan would be processed and will sit on the bank’s balance sheet. Shah added that he was in talks with three banks for the lending product but would start the pilot with one.

While Shah did not disclose the partner bank’s name, industry sources Moneycontrol spoke to said that the pilot could be started in partnership with IDFC First Bank.

“We were supposed to launch the lending product in the second half of 2020, but given the circumstances we thought of bringing up the launch date,” said Shah.

Interestingly, Cred is set to foray into lending when the entire fintech lending sector is bracing for tough times. Industry insiders have said that many banks have slowed down on their lending business causing fintechs to almost stop giving out new loans. Moneycontrol wrote on April 10 that ClearScore a fintech lending startup headquartered in the United Kingdom shut down its India business recently citing banks pausing product partnerships.

Cred has created a unique business model to create a customer base with high bureau scores who use the app to repay their credit card bills. Given this unique customer base with high financial credibility banks have shown more openness to partner with the platform to attract high quality customers.

“There has been some resistance from banks towards fintech lending, but for us it has been the reverse, they have been open to partnering with us as our customers have shown a steady repayment behaviour even in these tough times,” said Shah.

Besides the lending product, Cred will also allow its customers to pay their rental payments via their credit cards which are registered in the app. Shah said that it will ask the customer to register the UPI handle of the landlord or his bank account details. Then payments can be done through the credit card just like a normal merchant transaction.

Cred is backed by marquee investors like Sequoia Capital, Ribbit Capital, DST Global, Tiger Global, General Catalyst among others. It has raised more than $170 million funding since inception.