Hello and welcome to this special conversation. The person we have with us today has built one of the most talked about fintech companies in India, if not one of the more popular ones. And it's not by focusing on the next 500 million people, but it's by focusing very much on the top 20-25 million. Hot on the heels of getting a payment aggregator license and a whole lot more, we have a lot of questions for him. Kunal Shah of CRED joins us now. Kunal, always a pleasure to have you here on CNBC-TV18 and thank you for being generous with your time. Let me start with a payment aggregator since that's something that's just come in last month. Strategically into what we know of CRED, where does it fit in? Is it a cost angle? Because you're doing 8.5 lakh crores of payments annually, and you of course have to route it so far through third-party aggregators, which means there's a fee involved. Does that reduce this friction now?
First of all, thank you so much for having me. It's always a pleasure. I think when you are building a large-scale fintech business, you start by kind of working with all the infrastructure that is available, but eventually kind of have to build a lot of stuff on your own infra. And own infra means own licenses and kind of build more reliable systems. And at scale, even smallest optimization, be it on cost or performance, makes a huge difference, right? So, I think it's a step in that direction. Today we are one of the largest payments players, and the license enables us kind of do more things. We already are prominent at many merchants. When you go online, you see CRED online already there. It's just that we're trying to build a fully integrated system where at least for our members, it becomes a seamless experience to kind of experience CRED not just on our app, but across the internet ecosystem. And create a significantly more robust experience because we are living in a world of extreme impatience, and even smallest amount of microsecond delays is not tolerated anymore.
Yeah. But it's not just about experience, is it? You're also going to be going after merchant revenue. Is that something that will be the focus because that puts you in direct competition with a lot of, you know, neighborhood competitors you have here that have been in solely this business for a decade or more.
Yeah, I think our focus will remain consumer revenue. The idea of building the merchant like is to kind of make the seamless experience of the consumers who are using CRED to kind of be seamless across all merchant ecosystems. At this point of time, we don't see ourselves becoming a merchant company at this point of time. The consumer business, the customer cohort we have chosen continues to have very strong traction on customer revenue, right? And that's exactly what you see. Many internet companies started with solving hundreds of millions of customers, realized it makes money on 20-25 million customers. Thankfully, we knew this by birth. And we've kind of stayed there, right? So, therefore, focusing on that allows us to kind of not distract ourselves in different types of revenue streams, but the consumer becomes our core focus.
So, is the idea to be a full-stack payments player? And I'm also asking in the context of your previous statements where you say your DNA at CRED is to be a distributor, not a manufacturer. Is this leaning towards that side? Is this a philosophical U-turn or so?
Absolutely not. We remain in that exact same thing. Payments experience is what drives the core engagement loop for us, right? A lot of people come to manage their credit card, make sure they have the thing. We now power UPI, do many other things. And a merchant transaction is just an extension of the same engagement thing so that when they are using CRED, they're able to experience all the layers of payments, our bill payments, in a very seamless manner, right? On distribution, our stance remains the same. We believe that this exact engagement layer becomes the perfect destination for brands, merchants, financial services companies to cross-sell on top of our base. And that's what has been our business model. That will remain our business model.
Yeah. Well, cross-sell, like you say, is the focus. And one of the big verticals that you've done with the acquisition of Kuvera is the focus on wealth management. You have what, 3 lakh customers, more than 30,000 crores of AUM. You've launched new features. What's the aspiration there? Is it going to be a huge enough vertical to rival something like the lending distribution business for you?
Yeah. I think the biggest challenge that we had in thinking about the wealth business is that today a lot of the monetization that existed in the wealth world may not be something that may be suitable for what customers should or what is good for customers, right? And we have had a philosophy that don't launch or build a product that we would not happily and proudly give it to our friends or family or not, right? And it keeps us honest, right? Even the features that we've launched on Kuvera recently were first built and tested when only a majority of our employees started using that product, we thought it was a good time to take it outside. And the philosophical point is very simple that truth may not necessarily make money when it comes to wealth, right? When you are telling people how they are truly doing in terms of performance, you may not be... It's a little bit like a mirror that probably lies to you will be used more often, right? But a mirror that tells you the truth may not be as frequently used, but you will actually trust it on the long run. And eventually do the right things that is needed, right? There is some parallels to wealth and health, right? I think it's about being transparent, being truthful about how the true performance are. For example, there is no app I know which says you're a bad investor, right? And we believe that at times you have to be honest with people, and therefore they can start the journey of correcting and doing the right thing. So, what we built, the first feature is like giving a mirror view with a dark framework to kind of give a complete visibility across the thing. But the feature that we have already seen great traction in it's been less than a week of launch, is the product surplus where we are allowing people to park their surplus money from the bank to liquid, but also allowing them a much larger limit. We are allowing them to have 4 lakh rupees to be allowed to be withdrawn within the next few hours or 24 hours limit because what happens is a lot of times when you're thinking of investing, you think of this as something that you have to now forget about and not have access to, right? And therefore you're okay to take as a smaller returns from what the bank gives you. But the thing is that if you're allowed to kind of park some money in liquid and while having large limits, and the large limits is really important problem for the top 25 million. I don't think that feature would naturally find some kind of traction in let's say the mass India because they are not thinking about right now. They're starting the journey in investing right now. But people who have kind of been investing and they understand the asset class, they would want to be able to invest in this asset class and have the liquidity that is going to be powering many of these things. So, what we've done is taken these two approaches, kind of go into that, and slowly build more and more things which again will operate from the principle of trust, ensuring that money works for you and never against you. And a simple self-reflection check is that don't do something that you will not do for your friends and family. So, that's the core principle you start with.
But Kunal, are you one of the most licensed fintechs in India? I'm asking because I mean, you have got this payment aggregator license. You have a PPI license for a wallet as well. You had a stock broking license. You know, wealth management is something you're looking at as well. Of course, you're a TPA with NPCI. I mean, the list goes on. Are you one of the most licensed fintechs? And what is the aspiration here? What are the white spaces you're still looking to fill?
I don't think we honestly track this as a metric, but honestly, when you are trying to be in a regulated business and provide a service that is consistently trusted, because what happens is in matters of money, right? The regulators across SEBI to IRDAI to RBI are extremely prudent to ensure that the customer is consistently feeling safe under the same regulatory coverage so that any point of time, we are able to deliver the same level of trust. For example, not only we are audited by these regulators, we are audited by people partners we work with. For example, banks who work with us audit us as well because they have the responsibility. So, I think what happens is we have to never forget that the business of money is business of trust. And business of trust is a place where everybody should be able to feel confident working with you. And if it means through licenses, if it means through audits, if it means through any prudent step that we can take in that direction, we'll keep doing more of it.
So, you know, last time I asked you this question about what next, you hinted at secured lending. We haven't seen much on that front. I mean, in lending itself, are you looking at other avenues?
So, we have actually launched a loan against mutual funds. It's scaling, and I think we do have aspirations to kind of take it to more assets. We believe that in 5 to 10 years from now, every asset of this country should ideally be either get tokenized, and I think there is a vision from the government to tokenize many of these assets. And it allows customers to borrow at a significantly lower interest rates in let's say unsecured. We do believe that a customer who has access to secured assets should probably find a way to borrow at a lower interest rate than higher interest rate through unsecured. And I think it may not be the most prudent financial cost because you make more money on unsecured, but I think it's the right call for the customer to have these options available for them to make that choice for themselves. Today, if I have 10 lakh rupees of mutual fund with me, and I'm taking some money to borrow for a vacation, we would want people to assume that there is a way you can access that. Today, now we have billions of dollars available in mutual fund AUM, less than 1% of that is leveraged for any kind of thing and most of the growth has come from retail customers, right? So, we believe that that format and I think, see, you go to most developed markets, it's a known thing that people borrow against their assets, right? This is the only first generation where we have some assets to start with, right? So, I think we are going to go to the next 10 years would be about how to make these assets work for you and not just be purely work as an investment vehicle, right? And I think what we have noticed is that the historical behavior was, 'Oh, let me break my mutual fund.' Or borrow unsecured, but what if there's an option that can allow you to do both the things without having to cost any of the income growth that you're likely to get. So, I think again, same principle, make the money or compound interest work for you and not against you.
Well, but you know, you alluded to the fact that we're an aspirational country. We're starting to build this wealth and how is that translating into business for you? Your last disclosed numbers are for more than a year back. FY25, you had 22,000 crores of a lending AUM book. That is one of your top three revenue generators. What else is growing faster and do you see that mix changing where some of these newer businesses you're coming into will start to contribute more meaningfully?
Yeah, I think some of them will start showing some meaningful scale as time progresses. Many of the new bets right now take some time to fructify. Many of the business that we talked about earlier are like been around for 5-6 years, so they can have their own timeline to kind of do that, but I do believe that financial services will probably remain like bulk of our revenue. There is no way we see ourselves to be kind of payments and lending distribution. Payments, lending, distribution, insurance distribution, wealth distribution, same category. And I think the share hopefully from lending will kind of move to other categories, but I think but lending, we are saying we are a developing nation, right? So, in a developing nation, lending remains large chunk of revenue not just for fintechs, but for banks, for overall ecosystem, right? I wonder what percent of public market PAT is around lending also, right? The thing is that these categories are reflective of where the nation is at right now, right? And it's also the most profitable. I think financial services as a category are fundamentally more profitable categories versus let's say many other consumer businesses that exist. The thing is that it is also the most regulated category, which allows you to kind of grow at a certain rate of growth, but gives you a significantly higher runway. For example, an e-commerce getting disrupted through quick commerce is the norm in the consumer businesses. Like for example, AI app and let's say there's a new AI app, like kind of you'll see consumer shift, but in regulated businesses, what you see is that there's a compounding benefit for a brand to be around for 10, 15, 20 years because when it comes to trying new things, you would be very happy to switch to a new fashion brand or a commerce brand and download an app, but when it comes to money, you believe you... I think when companies get to 10, 15, 20-year mark, they actually start becoming more valuable.
Okay, speaking of that, you're 7 years old now. And you know, we've spoken about this IPO before and you said the company is too young to do this. So, what? I mean, does it have to be a teenager before you consider that? Do you have some number in mind, some milestone?
I think at this point of time, the company is growing in a very healthy manner. There is a very conducive market for good companies and what we've seen in the last 5 years or more recently in the last 2 years is that companies with solid foundation, solid consumer love are seeing good outcomes in the public market. So, there is no reason for one to feel that rush to kind of rush towards the same thing because ultimately our markets are here to stay, right? They have lasted much before any of these companies existed and they will continue to exist even... I'm only asking perhaps because there's a lot of interest in this company and maybe investors want to be a part of it, not just your investors. We believe that we should feel confident where we believe that this is the right time to take the thing and we should believe that whatever capital we raise should be kind of built towards kind of creating something bigger and larger. At this point of time, we feel confident today like when we compare ourselves to let's say our peers in payments, like we already had a 12-14x on our pool, right? Like that already proves the hypothesis that we had that if you focus on the right customers, right? It's a little bit like how Android and iOS eventually became as an ecosystem in some ways, right? Like they are both valuable in its own right, but eventually focusing on some customers and we often joke internally that we are solving first world problems, right? Like it's a unique problem. When we built garage, we didn't expect like today maybe 12-14 million vehicles are parked on the platform right now. We have nothing to do with automobile, but we probably are the largest vehicle management platform in the country right now. I think as we can create, focus on solving more first world problems, we are creating this unique place where if you are let's say creditworthy affluent customer of India, this becomes the place you go to.
Sure. That doesn't answer the question on how long. I mean, I've heard that question more from you than my board.
But at this point of time, not thinking about it actively. Heads down, focusing on business. We are very excited about launching many many new features that you will hear about, but build mode is the focus right now.
The other question you probably keep hearing from me is on profitability. We know you've halved your operating losses. Is FY26 any better? Are you closer to breaking even?
If you look at any internet company, the standard thing that you will see is that they start with investing towards building distribution, creating engagement and eventually kind of those lines kind of go in the opposite direction and that's no different for any company that's gone public to what we will also have the trajectory. It's just that we are not hyper obsessed about that because of the category we focus on. Today, there is a lot more opportunity on ARPU expansion for us. We can easily 2x, 3x, 4x our ARPU in the next decade or so, which very few companies have the clear opportunity to do that right now. So, I think we look at the capital as a way to invest in many categories. For example, today, I would say 30-40% of our let's say payroll cost would be towards building new products, right? If one had to say that, 'Okay, let's not build new things. Let's just monetize that.' Any company can be profitable. So, we are not thinking about this right now.
I know. So, every time I've asked you this, I seem to get the sense that you have this philosophical comfort with a loss-making company, but I wonder if, you know, these institutional investors you've raised more than 900 million dollars from, do they share that comfort?
I think first of all, companies who have gone public ahead of us have raised a lot more capital than us, number one. Number two, every company has to figure out a way to make the gradual growth of revenue and reduction of profit to kind of be in a certain manner, right? And that's true for any company. Maybe true for CRED, maybe true for anything and every now and then you also might find opportunities to go and build a business. For example, many companies that have gone public with profitability suddenly realizing that we have an opportunity to kind of go aggressively, then they're investing in that. So, I think we should look at what is the true potential and viability of a business versus profit being the core goal because if you have an ability to, which how many companies in India, except the internet companies, have the opportunity to grow revenue by 5-10x? I think that's the question. Today, investors have understood that path and therefore even in public market, there is a tolerance for loss-making because there is a clear revenue potential growth that you do not see in traditional non-tech companies. I think that's the lens that we should be applying now.
But you know, for any fintech business, capital is the raw material. You had your last round sometime last year. How much of a runway do you have before you have to go to the markets again? The reports suggest you were in talks to raise some money in the near future.
First of all, we were not in the market and we were not talking to any investor. We have enough capital right now to last us for as long as we want because we are kind of operating with a certain scale right now, right? Also, raw material for fintech is true if you operate a lot of business through your balance sheet. Yeah, which you're not doing. You're in distribution business. So, I think they're fundamentally different businesses. So, the capital requirement of our type is to kind of build distribution of growth of customers, which we've kind of captured a decent market share and we continue to build with lot of organic traction that we built because now a lot of times earlier, people used to come to CRED for credit card bills. Now, there are multiple reasons to come to CRED, right? And we see that market share and cross-sell growing rapidly.
You know, Kunal, I follow you on social media. You post a lot about AI. You're quite AI obsessed. But tell me, within CRED, apart from improving the user interface, where is artificial intelligence and newer technologies actually making a difference, you know, in your day-to-day operations in your business?
I think the first lens to apply is artificial intelligence or any technology's core purpose is to make things more efficient. When you have a technology that can make things dramatically more efficient, the first unit need to apply this to is every individual. Every individual can... Let's take an example of a journalist, right? There are like journalists who are leveraging AI, right? I've heard about journalists who have gone and using their AI avatars to be now telecasting stuff. And you're also seeing people who are kind of not adopting AI, right? So, you see that that causes that level of shift. So, I think first focus we had is that how do we make sure that every single individual who works with us is now becoming proficient at AI and enable them in material way. Second thing is that a lot of our internal wiring and internal systems, like are now moving the AI direction. Today, I would put a number maybe 90-92% of all our code is written through AI now, right? So, this is just many things that will eventually every process right? You will see for example, one of our interesting story, one of our operations leader figured out a way to build a significantly higher operating efficiency and now they could do 10x work with the same amount of team, right? And these are real things that are happening all around us, but I think we're underestimating the quality of models that are coming in the next few years, which could unlock even bigger potential. See, a lot of times, let's say when GPS came, it was a certain thing. Internet came, it's a certain thing, but this is one of the technologies that's exponential in nature, which means that the things it can do is growing almost on a daily basis.
