Fintech unicorn CRED recorded a net loss of ₹1279 crore in FY22 even though its revenue jumped by almost 340 per cent from ₹95 crore in FY21 to ₹422 crore in FY22.

The company’s losses have more than doubled from ₹524 crore in FY21. In a conversation with businessline, CEO Kunal Shah attributed the losses to the company’s focus on building a community of members and building the brand. CRED said it has grown to a base of 11.2 million members in FY22 as compared to 7.5 million in FY21. 

Under expenses, marketing and business promotion expenses accounted for the majority ₹975.8 crore, followed by ₹307 crore spent on employee benefits expenses and payment processing chargers and other direct costs contributed ₹158 crore and ₹243 crore of other expenses.

The four-year-old start-up rewards customers for paying credit card bills. However, it only allows high credit-worthy customers with a minimum credit score of 750 are allowed to sign up on the app. Today, CRED has built multiple user cases for its customers including cash, mint, pay, credit card bill payment, max, rewards, store and travel. 

Monetisation levers

Of the 11.2 million user cases, the company said 90 per cent of the members redeem a reward with CRED every month. Talking about the monetisation levers of CRED, Shah said, “Because of the customer choice we have made, all of our monetisation levers are kind of doing well. These levers are cross-selling financial services, merchant products, and e-commerce payments including rent payments, among others. Having multiple revenue lines gives us confidence that in the future, as we add more monetisation levers, they are all likely to do well because the adoption of the members to do different products had been pretty strong.”  

Adding to this, Miten Sampat of CRED said, “It’s by design that we have different products that appeal to different parts of our community and at different points in time. At some point in time, users might choose to pay rent using a credit card for the next three to four months. For the next cycle, you might say I want to travel. sometimes you might want to buy something from the store - these are all very different things. Different parts of CRED are very deliberately designed as a multi product.”

Responding to CRED’s mounting losses and focus on profitability, Shah said “Companies exist for profitability and we make choices on when do we play what chapter. Our intent is to build the community, get more products,  build more partnerships and create more engagement. Then go in their direction of monetisation and profitability,  in that sequence.”

Building products

On being asked about his plans to enter the BNPL (buy now pay later) space, Shah said the company’s approach is to do things right, even if it takes them longer to do it. Structurally, Shah believes, CRED’s focus is on building the community has been a lot more important than trying to launch many things. 

It should be noted that fintech sector has been facing many regulatory changes over the past few years, leading many start-ups to change complete business models. Shah argued that the regulatory uncertainty has nothing to do with the company’s steady approach towards launching new products.  “I have been in fintech for over 12-13 years now including the years I spent building Freecharge. The regulations in fintech have always been around. In general building products takes a lot of care about the consumers and not taking shortcuts is always the right thing to do,” he added.