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Cred to enter peer-to-peer lending with user funds


Fintech startup Cred will enable peer-to-peer (P2P) lending for its members.

This is the first investment-focused product that the three-year-old startup has launched, Kunal Shah, the founder and CEO of Cred told ET over a video call.

Cred Mint, launched in partnership with P2P non-bank LiquiLoans, will allow users to ‘invest’ their savings in a capital pool, which will then be used to on-lend to other customers on the platform seeking personal loans.

Those investing in the product will earn interest of around 9%, while loans will be disbursed at a rate of 12-13%, Shah said.

Cred will allow users to put between Rs 1 lakh and Rs 10 lakh of their capital to the lending pool.

“While we were studying user behavior on our platform, we realized that many of our members have lakhs in savings lying idle in their bank account, accruing interest rates which don’t even beat inflation,” said Shah. “This is an erosion of wealth and as a community of high trust individuals we felt that P2P lending offers a low-risk investment opportunity for a Cred member investing in another.”

P2P is a lending model via an online platform which matches lenders with borrowers.

While returns on these investments are subject to repayment of the extended credit, most non-banking financial companies specializing in this category take the risk on their books and offer a fixed interest rate.

LiquiLoans, LenDenClub and Rupee Circle are some of the licensed P2P lending non-banks in India.

Shah said this was the first ‘community product’ from Cred among others on the anvil by the startup. The Bengaluru-based startup, founded by Shah – a serial entrepreneur – wants to create a financial community exclusive to high credit worthy individuals.

Since its
launch as a credit card repayment player in 2018, Cred has forayed into e-commerce, lending, payments and now investment segments.

CredETtech

“About 25-30% of all credit card bill payments in India are happening through the platform,” said Shah. “The commerce business is doing well, and we have over 2,000 brands. Our payments piece, which is young, is also growing 60% month on month.”

Cred, which launched its lending play in 2020 in partnership with private sector lender IDFC First Bank, said its loan book is now at over Rs 2,000 crore, with non-performing assets at under 1%.

On Cred’s business model, Shah said: “Cred was designed as a community of high trust individuals. We monetize by cross selling through two big constituents which is our merchant partners on – commerce and payments – and financial services partners. Is Google a search company or an advertisement company? The question of how you make money is what defines you or what solves for your consumers?”

In April,
Cred entered the unicorn club when it saw its valuation nearly triple in less than six months to $2.2 billion after raising $215 million in an equity round co-led by new investor Falcon Edge Capital and existing investor Coatue Management.

According to media reports, the firm is also in talks with existing investors to mop up more capital in a new round, which could nearly double the startup’s valuation.

Shah said that while there is “interest” among existing investors to infuse more capital, talks are very preliminary at this stage and not binding.

Cred
raised its Series A round in August 2019 at a valuation of $450 million. Its seed round of $30 million was one of the largest seen in India’s startup ecosystem.

The company charges partner businesses on its Cred Store – an ecommerce platform — a prescribed fee in return for increased engagements. It also charges its bank partners a cut of the fee for improved fiscal discipline of customers for new lines of credit availed through the platform.

The startup has over 1,300 brands as members including Samsung, Myntra and Curefit.

It has onboarded around 3 million customers over the last two years.

Shah previously founded e-wallet Freecharge, which was
sold to ecommerce firm Snapdeal for $400 million in 2015, in what was one of the largest M&As in the internet sector then.



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