Those moments when you have to return items from your shopping cart due to insufficient cash may now be over for Nigerians, thanks to CredPal’s credit cards.

CredPal goes a step further from your regular financial services institution which offers you a loan when you request, and now gives customers a credit card with which they can shop for their needs and pay in instalments.

CredPal makes use of Visa cards which serves users at POS channels and ATM points, making it a convenient way to access consumer credit. You can think of it as similar to the credit card services offered by companies like American Express across Europe.

Speaking during the Nairametrics Business Half Hour show on Classic FM, CEO and co-founder of Credpal, Fehintolu Olaogun explained that CredPal was birthed due to an observed need for such facilities in the Nigerian space.

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“I remember moving into my house at first, and I had to wait for almost four months to get my gadgets because I did not have the bulk sum at the time. This is a situation many Nigerians experience, and they have to put off getting such item no matter how pressing the need may be,” he narrated.

Before starting CredPal, Olorunfemi Jegede was running an e-commerce platform and noticed that customers were often on the lookout for ‘Buy now, pay later’ options. With this observation, the duo decided to work on a checkout payment gateway that would allow the customers to pay later and in instalments.

“Our drive was simply to allow people access credit to buy items and then pay later, and there was a wide acceptance among the customers. So we threw in some more money behind it, reached out to some merchants and money lenders and extended the service to allow people pay their bills. With our credit cards, you can pretty much do anything and you only pay for what you use,” Olaogun explained.

To move things to the next level, there was a need to go beyond bootstrapping and bring in some collaborators and partners. The finance needed for scaling came in a mix of equity, seed funding, and hedge financing from lenders and people who wished to put money. Since both founders had pedigree founding and running a startup, it was easy to get their foot into the door and talk with investors. Another thing they had going for them was an established market need, a working product and huge demand.

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Shortly after starting operations, CredPal won $25k and the “Merchant Payments” Challenge for allowing individuals and businesses to pay for purchases in instalments across online and offline merchants, and gained recognition at the Visa Everywhere Initiative for Sub-Saharan Africa.

In March 2019, CredPal was accepted into the Y Combinator Winter batch alongside other African startups like Wallets Africa, Schoolable, and 54gene; and they received $150,000.

In 2020, CredPal raised $1.5 million in a funding round which included US seed-stage accelerator, Y Combinator; Lagos-based fintech investment holding company, GreenHouse Capital; Tangerine Life, a digital insurance company; and other VC firms.

Also in 2020, CredPal was selected and participated in the fifth edition of Google for Startups Accelerator Africa – a 3-month-long programme for the startups which gave them access to mentorship, funding, and PR support, among other incentives.

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Market entry and operations

Olaogun recounts that the first step to entering the market was going through the merchants. Most of these merchants encounter retailers and other customers who would wish to purchase more items but are constrained by available funds. It was therefore easier for the merchant to suggest a credit alternative for the customer, who already had a need for such service.

Another tactic that CredPal deployed was the affiliate marketing method where people sign up for free as affiliate marketers, promote the product, and are remunerated monthly based on the number of customers they get for the startup. To adhere to the COVID-19 guidelines, a part of the team works from home while a few work from their operational office in Lagos.

With the low-interest rates, customers can get these credit services for as low as 2.5% interest rate using either the mobile app, or the credit card. Merchants also embrace the service quickly as it allowed them to get the value for their goods almost immediately, and save them the trouble of having to go after debtors.

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Getting back the money

The challenge for individuals and institutions in the credit space is often about how to get the repayment done seamlessly, and without having to run after the debtors.

In this light, sentiments across board favour the growth of the credit business as the apex bank has been on the drive to increase lending in the country. The GSI policy which was introduced late last year was targeted at encouraging this move, by authorising the banks to deduct from customers’ accounts directly.

CredPal also partnered with and integrated Pngme’s data SDK and API to acquire user-permissions, mobile-based financial data (such as connected institutions, balances, transactions), to provide a secure and detailed data foundation to manage its subscription base.

This is in line with the vision of becoming the American Express of Africa, a continent that is still largely untapped.