The Indian startup culture has given birth to some of the biggest companies in the world, with digital payments company Paytm (India’s biggest startup) and online learning platform Byju’s (world’s most valuable edtech startup) serving as prime examples of the promise in the country’s growing market. However, among these household names and the cut throat competition, one company has managed to become an industry disruptor faster than anyone else.
Thus, the two-year-old start-up CRED, which operates an app that rewards customers for paying their credit card bills on time and offers deals from online brands such as Starbucks, Nykaa, and Vahdam Teas, is set to be the next unicorn of the country. The start-up, founded by serial entrepreneur Kunal Shah, is set to raise about $200 million in new funding round, which will put the firm’s valuation at over $2 billion, according to a report by TechCrunch.
The financing round will be largely financed by existing investors, like the Series C Funding Round earlier this year, and is expected to close within a month. The round will make CRED the fastest start-up to attain a $2 billion valuation and the second fastest to become a unicorn in India – it would have taken CRED only 29 months to become a unicorn. It was valued at over $800 million in January and $450 million in August 2019.
CRED is now the talk of the town for the sheer pace at which its valuation is soaring. Backed by high-profile investors including DST Global, Sequoia Capital India, Tiger Global, Ribbit Capital, and General Catalyst, it is the fourth unicorn in India in 2021, after online insurance firm Digit, B2B firm Infra.Market, and Innovaccer, a Software-as-a-service (SaaS) firm. It has raised about $228 million to date.
CRED, based in Bangalore, has over 5.9 million customers (20% of the credit card holder population in the country) as of January.
“India has 57 million credit cards (vs 830 million debit cards) [that] largely serves the high-end market. The credit card industry is largely concentrated with the top 4 banks (HDFC, SBI, ICICI, and Axis) controlling about 70% of the total market. This space is extremely profitable for these banks – as evident from the SBI Cards IPO. Very few start-ups like CRED are focusing on this high-end base and [have] taken a platform-based approach (acquire customers now and look for monetization later). Credit card in India remains an aspirational product. The under penetration would likely ensure continued strong growth in the coming years. Over time, the form-factor may evolve (i.e. move from plastic card to virtual card), but the inherent demand for credit is expected to grow,” analysts at the Bank of America said.
CRED focuses on a premium set of users. Applicants must have a credit score of at least 750. In a recent newsletter, the company said that the median credit score of its customers was 830 and at “any given point in time” more than 375,000 individuals are on their waiting list, many of whom have improved their score to join CRED. “It’s easy to be responsible when you’re empowered. 80% of CRED Protect members got visibility on extra interest charges and avoided late payment fees by tracking their dues on CRED. Ignorance is not always bliss. CRED members detected additional charges worth over ₹145 Crores [$20.1 million] on their statements. CRED members avoided over ₹43.5 Crores [$6 million] worth of late payment fees,” it wrote in the newsletter.
“With the help of regular bill payment reminders, and a seamless credit card management experience; 160,000 CRED members improved their credit scores last month. CRED members know it pays to be good as they earned cash-back worth ₹12 Crores [$1.65 million] by paying their bills on time. There’s always something to look forward to on CRED. Our members got access to over 750 new rewards and products.”
Whether you are a CRED person or not, the company has managed to create a new category, and done so at an unprecedented pace.
