#8. Trust in Fintech
A credit card payment platform scaling trust in India, a BNPL losing reputation in Nigeria and a newsletter summarizing Fintech in EM.
Welcome! Issue #8 of Emerging Markets explorer đ§Â covers a valuable asset in the finance industry: trust. CRED scaling trust in India, Carbonâs Zero reputational damage and Fintech Inside to be up-to-date with the Fintech scene in India, South East Asia and Europe.
If you wonder what Emerging Markets explorer đ§Â is, start here.
đ Remember the restrictions in cryptocurrency trading imposed by the Central Bank Nigeria? Users are still finding ways around it: weekly buying and selling is usually exceeding 1BN NGN, a volume comparable to the volume seen before the CBN comuniquĂ©.
CRED: scaling consumer trust in India
CRED is a fintech company on the mission to codify, scale and reward trust in India, which has a severe trust deficit. Founded in 2017 by Kunal Shah, and launched to the public in mid-2019, it is already valued at $800M.
CRED is a members only credit card payment platform that rewards its members for clearing their credit card bills on time. To become a member, you need a credit score equal or higher to 750.
CRED is a community of high spenders with sound credit behavior, with 6M active users. As per context in the Indian market: debit cards are the majority: 886M debit cards issued as of December 2020, vs 60M credit cards. However, in terms of volume spent, in 2020 $85.8BN was spent in debit cards and $83BN in credit cards. Given this, CRED serves 10% of the credit card holders in India, and approx. 20% of all credit card payments in India.
CRED was founded by Kunal Shah, a second time entrepreneur in the fintech space. He claims that CRED is not a fintech company, but a lifestyle company.
And what is the offering that attracted these 6M users? From rewards in bill payments and access to a marketplace of exclusive products, to scanning the credit card statement to alert users of hidden charges. Everything in CRED is built for trust, even the organization: it pays salaries on the 1st day of the month to be worked, and they send out laptops along with the offer letter.
But for this $800M startup, not everything is perfect: they have yet to prove that their user base can generate long-term revenue: they have captured an attractive user base in 1.5 years of operation, but CRED is reporting losses.
Failure story: Carbonâs Zero hidden charges
Carbon Zero launched with the goal to become a pioneer in the Buy Now Pay Later model in Nigeria.
The Buy Now Pay Later model in Nigeria faces local challenges:
The credit culture in Nigeria is not as active as in the US or Europe.
Identity and financial data is not as widely available as in the US, and thus it needs for a lot of groundwork.
Nigerians don't make a lot of money, so they perceive themselves as less likely to pay back.
Where others see a challenge, the Nigerian digital bank Carbon saw opportunity. In January 2021 it launched Carbon Zero: a BNPL where users earning a minimum of 200K NGN monthly could make purchases in their marketplace at 0% interest, making a 20% down payment in every purchase.Â
Their claims for 0% interest did not remain undisputed for long. Their reputation was damaged when people realised that there was a large difference in market price and the price of Carbon verified merchants: an iPhone 12PRO would be 71% more expensive in their site.
Source recommendation: Fintech Inside
Fintech Inside is a weekly newsletter for curated updates in Fintech in India, South East Asia and Europe.Â
Written by Osborne Saldanha, who has been covering Fintech investments for 6+ years, it aims at becoming the front page of Fintech in Emerging markets.
It includes dive deeps (like the issue that helped me discover CRED), Fintech job postings, market updates, and regional Fintech updates. We have in common the philosophy of not focusing so much on the US startup landscape, which already crowds our feed, but looking to other markets where innovation is happening.
Additionally, Osborne constantly experiments with the format, with the goal to become an attractive resource that is easy to read and provides relevant content. You can read it here.
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