💳 Unicorn of the Day: Slice
Another day another Unicorn. Today’s Unicorn is changing the way India spends.
What do you think when you hear the words "credit card"? Huge bills, very high interest rates, hidden fees and maybe even never-ending debt?Â
But what if we told you there was a credit card where you didn't have to pay all these extra fees? A credit card, which could be flexible about payments. Sounds too good to be true?
Slice, a credit card startup that offers just this, became India's 41st unicorn, with a valuation of over $1 billion!
What's Up With Credit Cards?
A credit card is the perfect payment option in times of emergency. And if paid on time, it can also help you build your credit score. A good credit score goes a long way in availing easy borrowings at favourable terms. Looks super lucrative, right?
But the reality is much different. In India, even getting a credit card is a big hassle. You have to have a job and fall into a particular income bracket to even qualify for it.
Plus, many people don't exactly understand how a credit card works. So, they are stuck with huge bills that they are unable to pay.Â
But don't you just have to pay the amount that you spent using the card?Â
The clever credit card industry has created many hidden loopholes and charges so that they can get that extra cash from you.
For instance, most credit cards in India allow you to pay off a minimum amount of your bill so that you are not tagged as a 'defaulter'. Now, many people think they can get away by paying this small amount right now and pay the rest of the money later. This is where the problem starts.Â
There are no free lunches. You will have to pay a huge interest on the unpaid balances. Often this interest is calculated from the day of your purchase and not the day on which you got the bill. The interest rates are also not nominal. They are insanely high, approximately 40%-50% for a year. Sounds crazy, doesn't it?Â
Also, these credit card companies often charge you extra for a select category of transactions. For example, if you pay for fuel using your credit card, you will be charged extra.
Because of all these riders and roadblocks, only 4.5% of the population has a credit card in India.
Slice Enters the Market
Enter Slice. Founded in 2016, the company aims to solve all the hassles of a credit card. It created a credit card that was targeted towards college students and young professionals who were often unable to get other credit cards.
Not just that. It offers a credit limit of Rs. 2,000, the lowest credit limit offered in India. By doing this, Slice hopes it can make credit cards available to those with low income and bad credit history. You see, Slice wants to become the credit card for every Indian and not just a select few.
And that's not all. It also allows customers to "slice" their bill and pay it over a three month period. If you pay your bill within this three month period, you won't have to pay any interest. This is the longest interest-free bill payment period currently provided by any credit card in India.
But why is Slice taking such a different approach from other credit card companies and banks?Â
That is because its founder Rajan Bajaj believes that credit cards should be a payment product that solves a customer's problems. It should not be seen as a loan.
So, Slice wants to take a customer-first approach and provide a great customer experience instead of charging hidden fees.Â
Its efforts have surely reaped results. 70% of Slice customers come through referrals from existing customers. The company hardly spends any money on advertising.
And the amount that it saves on advertising, it spends on giving rewards to its customers. Yes. Slice offers up to 2% rewards on every card transaction you make. These rewards can be redeemed instantly and converted into cash.
Who wouldn't want in, in such a lucrative offer? New card issuances are growing at a rate of around 40% per month and Slice is recording an annual revenue run rate of $60 million!
Revenue? With no charges and only rewards, how is Slice earning any revenue?Â
You see, credit card companies have made us believe that they can only earn money if they charge us massive fees. But that's not true.
Do you recall how when you make a purchase on Amazon or Swiggy you get an option of additional discounts if you pay via credit card? These tie-ups are how credit card companies earn. Plus, every time you make a payment with a credit card, the platform on which you spend money has to pay a fee to the credit card company.Â
Slice is no different. It also earns in the same manner.Â
But then, what makes it so special? Why is it a darling for investors?Â
Revenue = Value of transactions * Commission per transaction
Value of transaction= Number of customers * Ticket size per customer
Slice has taken a unique approach to increase its value of transactions. Instead of focusing on select few rich individuals with higher ticket size, it is focusing on increasing its user base.Â
It has made the process very simple and transparent for millennials and Gen Z. It has also helped the credit scores of over 65% of customers to climb to 730 (which is considered to be pretty good).Â
But there's a dark side to this as well. This has encouraged some to spend more than their means. And Slice obviously benefits from this. The more the transactions, the more transaction fees it gets. Also, it doesn't solve all the problems of credit cards. Even Slice charges extra money for some transactions like refuelling your vehicle.
What does Slice's Future Look Like?
Currently, Slice has several competitors like LazyPay, KreditBee, ZestMoney and not to mention traditional credit card companies. The threat of getting copied is high. It needs to make some quick moves, add some unique, not-so-easy-to-copy propositions if it wants to survive.
Now that the company has secured $220 million in funding, it plans to expand its offerings and launch new products. Slice will also use this money to fund its non-banking financial company (NBFC) arm.Â
With its 3-day work policy, will Slice be able to move fast, or will it get lost as just another fintech company?
Only time will tell…
P.S. This is not a sponsored post.
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