Most affluent customers in India do not understand financial literacy basics, says Cred’s Kunal Shah

Kunal Shah, founder and CEO, CRED

Cred founder Kunal Shah on November 19 said that the country’s limited financial literacy, even among the affluent classes of the society, will eventually affect the innovation and credit growth of India’s fintech ecosystem.

Shah was speaking at Sahamati’s event Samvaad 2024 in Mumbai.

“Most affluent customers in India do not understand financial literacy to the basic points. When we started CRED, we interviewed credit card customers across the country and asked them, what do you think is the interest rate on your credit card? Most customers said it is 15%. It is far from reality. During COVID times, there was a moratorium that was announced, including for credit cards. Many customers thought it was a good idea to opt for that,” Shah said.

He shared how a Cred customer earning Rs 1.5 crores in salary back in 2018 never knew why his credit card bills weren’t getting fully paid despite not having any late fees – he never considered his pending interest rates he had to pay back.

“It's not just about the responsibility part on the lenders, it's also about the consumers. We're dealing with multiple challenges as an ecosystem and if we don't address them in a timely fashion, what we'll end up doing is putting more and more restrictions to innovation. More and more restrictions in accelerating the ecosystem because imagining a Viksit Bharat without very powerful credit growth in the ecosystem is unimaginable,” Shah said.

Some of these challenges include not keeping a tap on when credit is given, what is it getting used for.

Shah shared his family’s personal journey with credit. “I'm actually a product of irresponsible behaviour on credit. My family took some irresponsible credit decisions when I was in my teenage, which resulted in us selling all the things that we had, moved to a 100 square feet chawl with my mom, dad and younger brother,” he said.

He had to start working from the age of 14-15 as a part-time data entry operator and a part-time delivery boy. This had let to him dropping out of science and join Philosophy instead.

“I had to do that because while doing my job, the only course available from 7 to 9 am was philosophy, so I took that. I think there's a lesson to that. While I turned out to be okay, 99% of families never recovered from these things,” he said.

Shah urged that there needs to be different mechanisms of underwriting credit of various kinds especially those being used for speculative behaviours like using unsecured loans being used for real money gaming and F&O.

“It's easy to say, it's not my business, let's move on. But that is causing a huge amount of ripple effect and NPAs (non-performing assets),” he added.

On the business front, Cred, which offers payments, lending, insurance, and wealth management, is now looking to add stock broking to its suite, as part of its strategy to build a full financial services platform, Moneycontrol had exclusively reported last week.

The fintech unicorn has applied for a stock broking licence via its subsidiary Spenny.