Cred Launches P2P Lending Feature - Mint

CRED Expands Services with Peer-to-Peer Lending Platform

CRED, an Indian platform that incentivizes timely credit card bill payments, is extending its services to offer increased benefits to its 7.5 million users.

Introducing CRED Mint

The Bangalore-based company announced on Thursday the launch of a new feature, CRED Mint, enabling members to lend funds to each other with potential annual interest rates reaching up to 9%.

Kunal Shah, founder and CEO of CRED, stated that the feature is being initially released to a select group of users following months of internal testing.

“We are incredibly enthusiastic about this development as it marks the first instance of our community members directly investing in one another,” Shah explained in an interview. “The focus will be on secure, low-risk investments offering returns that surpass inflation.”

Financial Opportunities for CRED Members

CRED reports that its members typically maintain an average of 200,000 Indian rupees (approximately $2,685) in their savings accounts.

“With interest rates up to 9%, CRED Mint aims to provide these users – India’s most financially responsible individuals – with a more intelligent way to generate returns on their idle funds,” the company said. Early access to Mint is currently available through application.

Addressing Challenges in Peer-to-Peer Lending

While peer-to-peer lending isn’t a novel concept, CRED believes it is uniquely positioned to mitigate a significant challenge within the sector: loan defaults.

Estimates suggest that over 20% of borrowers in peer-to-peer services fail to repay their loans.

Leveraging a Creditworthy User Base

CRED members are required to have a credit score of 750 or higher, representing a highly trustworthy demographic for financial services.

“We are confident in the strong product-market fit of our offering and believe it could establish a new standard for fintech companies,” Shah added. CRED currently provides lending services to a limited number of members, having already disbursed approximately $269 million in loans.

Risk Mitigation and Security

The default rate for CRED Cash has historically remained below 1%. To further minimize risk, invested funds will be directly transferred to an escrow account managed by CRED’s NBFC partner, LiquiLoans, and distributed across a diverse portfolio of over 200 borrowers.

Partnership with LiquiLoans

For CRED Mint, the company has collaborated with LiquiLoans, a P2P NBFC registered with the Reserve Bank of India (RBI). Shah indicated that CRED intends to establish partnerships with additional financial institutions in the future.

Users can invest amounts ranging from 100,000 Indian rupees ($1,345) to 1 million rupees ($13,450) within approximately two minutes and can request withdrawals at any time without incurring penalties.

“The withdrawal process is entirely digital, and funds, including accrued interest, will be returned to the investor within one business day. As a digital platform, CRED minimizes friction, inefficiencies, commissions, and overheads to maximize returns for its members,” the company stated.

Potential Funding Round

CRED, which is backed by investors including Tiger Global, Ribbit Capital, and Sequoia Capital India, was valued at $2.2 billion in an April funding round.

Sources familiar with the matter indicate that the company has received unsolicited interest from existing investors regarding a potential new funding round exceeding $300 million, which would value CRED at approximately $4 billion post-money.

Shah declined to comment on ongoing discussions regarding fundraising.