Kunal Shah's CRED to launch P2P lending feature Mint, denies funding talks

Two-and-half year old CRED is among India’s most discussed and debated startups, often a subject of internet bemusement for its rising valuation even as its revenue and profitability is unclear. (Representative image)

Fintech platform CRED said on August 19 it will launch a peer-to-peer (P2P) lending product called Mint for its members, the $2.2 billion startups' latest attempt to monetise through its 7.5 million users.

CRED, founded by second-time founder Kunal Shah started out as a credit-card repayment platform that rewards users with points for paying their bills, but has been adding products such as rent payments and personal loans, as it seeks to become a full-fledged financial services provider.

CRED Mint will be launched in partnership with Liquiloans, an RBI registered P2P non-banking financial company (NBFC), that counts Shah as an early investor. The feature goes live on August 20.

CRED also provides a short-term lending product, CRED Cash. The Bengaluru-based startup said it is now the country's leading fintech lender, with a loan book of over Rs 2,000 crore.

"Because of our high-trust community, we have NPAs of less than one percent. So we now have the confidence to launch the first community product. There is a lot of idle money sitting in people's accounts which is earning less than the inflation rate. They are effectively losing money," Kunal Shah told Moneycontrol in an interview.

 Mint is offering members returns of up to 9 percent per annum.  Members can lend/borrow in between Rs 1 lakh- Rs 10 lakh in under two minutes, commission-free, and also request withdrawal in one click, partially or in full at any time with no penalty, and earn interest for the period invested.

 Traditional P2P lending platforms have been moderately successful but drawn scrutiny because they attract borrowers with poor credit history and low incomes. Shah hopes to flip this by allowing P2P lending among people who have a credit score of over 750- India’s most creditworthy citizens. 

"This will be an invite-only product. We anticipate a lot more demand than the capacity to absorb. We will not compromise on the quality of our lending book. Because most platforms offer to low-income group segments, the NPAs have been high and the risk mismatch meant these platforms couldn't become big," Shah said.

 Shah is basing his optimism partly on the response that he saw from CRED's employees, who have been testing the product. He said 70-80 percent of them have invested and continue to invest every month in the product. 

 "If you can get 9 percent return on an investment that you can withdraw, park your idle money- I think a bulk of our members will be interested. It's a fairly representative cohort," he said. 

 Two-and-half year old CRED is among India’s most discussed and debated startups, often a subject of internet bemusement for its rising valuation even as its revenue and profitability is unclear. CRED, however, is far from the only one in this category.

Late last year it partnered with IDFC First Bank to give short term loans, its first shot at making money, when it was valued at close to a billion dollars.

CRED says its 7.5 million users are 35 percent of premium credit cardholders in India and that it processes a quarter of credit card bill payments in the country.

Earlier this year it raised $215 million from investors such as Tiger Global Management, DST Global, Sequoia Capital and Falcon Edge Capital.  The startup recently raised $215 million at a post-money valuation of $2.2 billion, one of the fastest companies to become a unicorn- privately held startups valued at over a billion dollars. It was valued at $800 million in October last year.

The startup ecosystem has also been abuzz with news that Shah is already raising his next round of funding, at a valuation of over $4 billion. Shah has been in San Francisco the past month, and two people close to him said that he held conversations with Andreessen Horowitz (a16z), the Silicon Valley heavyweight whose investments include Airbnb, Instacart and Coinbase.

While Shah acknowledged being in San Francisco, he denied speaking to a16z, and said he mainly met product managers, whom he wanted to learn from.

"I have not met anyone from Andreessen, for the record. We always had interest from internal investors who want to double down and invest more. We take a call based on when we need the capital. All our rounds have been led by internals. I don't have to raise money," he said.

He was also unperturbed when asked about the challenge in finding quality tech talent, in the current environment.  "We want to create the best environment where people have immense trust and provide wealth creation. We have one of the largest ESOP (Employee Stock Option Plan) pools. We do not struggle."

Shah, who previously founded and sold payments platform Freecharge, is also one of the most active angel investors in the Indian startup ecosystem, with an estimated portfolio of 150-170 startups.

His investments include lender BharatPe, edtech firm Unacademy and Razorpay- all extremely lucrative bets. But that isn’t his purpose, he says. "I invest to pay it forward. I don't track my investments. You can do philanthropy or fund job creators. India needs job creators," he said.