Kunal Shah is the founder of CRED, a members-only credit card payment app, and FreeCharge, a payments app now owned by one of India’s largest banks Axis Bank. 

CRED, which started in 2018, is a web-based mobile application that allows members to manage all their credit cards in one place, remind them of their due dates and reward them with coins that can be redeemed on experiences, brands and other benefits, every time they pay their bills.

Admission to CRED is based on the credit score for individuals without any charges and a fee for brands and institutions. For transactions that attract a processing fee, the user is notified on the app well in advance. 

A graduate in philosophy, Shah is a tech founder without an engineering background. He is deeply interested in understanding consumers better, and his fervor for behavioral economics has often led him to use microblogging site Twitter as a user feedback tool. 

Shah has been an advisor to the board of Bennett Coleman & Co Limited, the Chairman of the Internet and Mobile Association of Indian and an advisor to Y Combinator and Sequoia Capital India. 

He is an active angel investor and has mentored Asia’s startups such as Unacademy, RazorPay, Go-Jek, Innov8 and Zilingo among others.

In a conversation with Forbes Advisor India, Shah spoke about why he has focused all his energy into the credit lending market in India via his latest venture and his hopes of seeing Indian entrepreneurs create the country’s next million jobs. 

What roadblocks exist for the credit lending industry in India?

In India, three aspects play a major role in determining the health of the country’s credit industry.

One is the role of income declaration and stable income, which results in credit to be seamlessly available. And it’s not about identity; Aadhaar has taken away the issues relating to identity. But you still need income to get credit so that the banks have something to underwrite you against. 

I think the important thing to understand is that for credit to exist in a formal manner, there needs to be either stability of income, or clarity of income in terms of a structured manner and the role filing income tax plays. 

Second is that the female participation in labour is so low that our per capita income is continuously kind of constrained because of that. A very fundamental issue that people tend to forget about India is that India is a very strong patriarchal society that has not created financial independence for women. And therefore, usage of credit has been limited to what use cases that say, men come up with. This is a big factor that drives unique use of credit and credit cards and that has not been done so far in India. 

The third thing is poor financial literacy. So, there is this general fear about money and credit cards and loans. We all grew up with the mindset of saving money, and all of us have just kept money in the bank accounts where that money earns a minimal 2-3% interest. 

We do not understand the concept of compound interest, of how money flows and the concept of inflation. These concepts are very alien to most people because of our education system; we were never told about financial literacy and were never trained about money. We are good at math but terrible at money.

Can credit cards in India scale to the extent it is in developed countries such as the US or the UK?

I think credit cards don’t emerge when a country becomes developed, but the existence of credit cards makes a country developed. Because consumption is a big factor, which creates growth in per capita income consumption is the big factor through which incomes of people grow. 

And I think the moment we democratize access to credit to the destinations where consumption happens, we’ll automatically make the ecosystem thrive on credit. And it may emerge in the form of credit cards, it may emerge in the form of a credit line on the phone, it may emerge in the form of your bank extending a loan on your spends on your debit card; there are many many ways. 

So I believe the future of credit in India may not necessarily be in the form of a card, but a simple product that allows you to buy something in the future by paying equated monthly installments or EMIs on a regular basis. And I think as a country, we cannot forget that the progress of our country in terms of per capita income or jobs is only going to come through consumption. And we are not going to create a much bigger opportunity without that. 

What has motivated you to invest efforts in the credit lending industry?

I think the motivation was personal in many ways. 

I got to start early in my life and was financially independent from the age of 16 when I was still in school due to a financial crisis around debt that my family went through. We saw all the things that can go wrong with debt—dad’s business did not work, we lost our house to that. That has been one of the motivations at the back of my mind. 

Another motivation has been to create an ecosystem where the good actors win. 

I think we really need to take care of the top 2% of Indians who are paying taxes, because what if they leave India? Who’s going to be building this country? 

I always wondered that if we do not reward the good actors, will more people be interested in becoming good actors. I think to me that remains a core motivation to build CRED, and I think if nobody is really batting for the good actors, I should. 

If you make the good actors win, more people want to be good actors. We are not in the business of punishing anybody, but if we can make their lives better, more people will want to care about it. If more people want to be good actors, the country will prosper. 

What empowers you?

I guess the spirit to see Indian entrepreneurship do well.

I had the opportunity to become an investor and I chose to start up again. I have invested in up to 60-70 startups, have mentored several hundred founders and I believe that the pandemic that we need in this country is of entrepreneurship. 

If we have more job creators, then naturally we’ll get rid of the addiction of seeking jobs and we will have prosperity coming in. I believe we are all patriotic at heart. Like I had the opportunity to move abroad but for some reason we are all irrationally attached to this country and we would love to see it do well. What drives me is that hunger to see that happen. And more and more and more opportunities coming in and helping people through that. 

If we nurture entrepreneurs who have a wealth-creating mindset, maybe 500 people in our teams will become entrepreneurs and create the next big thing. I think that’s what empowerment to me will be.