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Three years after its launch, CRED has entered the unicorn club with a $2.2 billion valuation. It is surreal to see an Indian brand grow so fast, even with such a limited audience base.
No doubt CRED has used some mind-boggling marketing tactics to introduce its product to users. We can see some Bollywood legends advertising CRED facilities.
CRED is India’s one-of-a-kind app that helps people pay their credit card bills on time and, in return, provides cashback and offers rewards from various other platforms like Paytm, Phonepay, Swiggy, Urban Company, and others.
To your surprise, only 4.6 percent of India’s population uses a credit card, and out of this, Cred accepts people who have a credit card score of over 750. This filters their target audience to the core.
Recently CRED has raised over $251 million in a Series E funding – co-led by Falcon Edge and Tiger Global.
CRED has paved its way into becoming one of the most influential brands in such a short span of time.
Let’s dive in to understand the CRED business model and how it makes money.
What is CRED?
Most of us fear having a credit card due to its high-interest rate, bad experience with credit card agents, or shopping endlessly.
But, if used right, credit cards have so much to offer; it can tremendously help you in the long run while taking loans. You just need the right skill to manage credit cards and initiate timely payment. However, sometimes handling so many credit cards becomes tiresome and this is where CRED comes into place.
CRED becomes your life savior in managing your credit card bills and ensuring you do not miss your payment deadlines, offering rewards to save money on future transactions on platforms.
If we talk history, CRED was launched in 2018 as a credit card payment handling company in Bangalore by Kunal Shah.
Previously in 2010, Kunal was also the owner of Freecharge, famous for bridging in exciting deals and cashback on every recharge made by the user. The company saw great profits and onboarded companies like McDonald’s, Jabong, Myntra, BookMyShow, and other famous companies. Freecharge had over 52 million total wallet holders.
In the hope of doing something bigger, Kunal sold Freecharge to Snapdeal for a whooping ₹ 2600 crore.
CRED’s major objective was to attract premium credit card payers that already had an excellent credit card score. So, just anyone with a credit card cannot be a part of CRED, and that’s what most of their marketing tactic is all about. They show their brand as premium and are only of the creme class.
CRED is an RBI-approved company that helps its members manage credit card payments, mega jackpots, and cashback.
Here, you get complete freedom by handling all your credit cards in one place with payment reminders and keeping track of their credit card limit.
How does CRED work?
CRED is a credit card payment handling platform that ensures you hit timely payment in exchange for rewards. Kunal Shah, the co-founder of CRED, believed to save its users from the extra charges they will pay in case they forget to pay their credit card bill on time.
The platform targets only premium clients with a higher credit score. CRED has boarded over 5.9 million users and contributes to 20% of credit card payments in India.
So, when you install the CRED app, the platform will ask for your credit card details to evaluate your credit card score. You would get into the app only if your credit card score is up to their standard, else the app would direct you to the waiting list.
CRED follows two major reward models-
- Points- Every time a user makes payments, they are rewarded with CRED coins. The value of these coins are dynamic; however, the rewards earned can be used by members in future transactions or when buying through CRED stores.
- Gems- Another earning model in CRED is its referral model. Every person who downloads CRED using your link gives you ten gems. You can refer to the following table to understand the value of these gems-
10 Gems = Rs. 150 Uber Voucher.
20 Gems = Rs.500 Flipkart Gift Card
30 Gems = Rs.1000 Amazon Voucher.
30 gems = Rs.1000 – Rs.10000 cashback on Credit card
Besides these, CRED offers various jackpots and offers that encourage users to initiate payments through the platform. Exclusive members would also get access to other CRED products that are totally wholesome with some excellent deals.
CRED has a tie-up with over 2000 brands and 34 banks to help its members get exclusive prices and instant credit.
What is the CRED business model? How does CRED make money?
Just like any other fintech app, CRED isn’t limited to a single source of revenue. CRED makes money from multiple platforms; let’s discuss them in detail below-
- CRED products- In the next section, you will see the platform’s different CRED products to its users. CRED has collaborated with some of the biggest brands. So, every time a member initiates payment for an offer, CRED receives payment in turn for the business generated.
- CRED listings- As we mentioned, CRED collaborates with thousands of brands. Each of these platforms has to pay a certain fee for them to list their products. This way, CRED earns from both posting about the products and also when a sale is made. As of now, It is said to be a major source of income for CRED.
- Third-party advertisements- CRED targets 1% of the creme population of India that has large purchasing power. Owing to this, various brands want to post their advertisement on CRED. This way, they can enhance their business presence and get high-ticket sales. So, on every sale made on the platform, CRED earns a part via commissions.
- User’s data- When you make an account on CRED or initiate payments, the platform gets access to some of your crucial data helpful for credit card companies and banks. Many financial institutions look for such customers for either selling them credit cards or lending loans. So, CRED shares some of its member’s credit information with these companies and earns quite well.
- Revenue via loans- CRED itself offers instant loan facilities to its members. The platform gives loans at a 9% percent lending rate through CRED Mint. As it deals with only premium clients, the loan amount is often quite large, and CRED earns pretty good profit from the lending.
Who is CRED’s customer target segment?
This unicorn startup is very particular about the people they target. CRED was initially launched to target only premium clients who own multiple credit cards and make premium transactions. But, now, getting into CRED is simpler as you only require a good credit score of 750.
The target segment of CRED is limited to people aged 25-40, most people over 30. Even their ads focus on people of Gen Y like Madhuri Dixit, Govinda, Rahul Dravid, Bappi Lehri. All of them were superstars in the 90s.
CRED accepts the CIBIL score (Credit Information Bureau (India) Limited) for evaluating its members. The CIBIL score is a three-digit number that summarizes your credit card history. A higher score implies excellent credibility and vice-versa.
The CIBIL score is affected by the following factors-
- Credit history- Your credit history forms the base of your credit score. It reflects consistency in payment that is important for an excellent credit score.
- Credit utilization- Each individual is assigned a credit limit by its current payment trends and available bank balance. While calculating your credit card score, the software also goes back and forth, calculating the amount you have already withdrawn and how it is still left.
- Credit mix- There are majorly two types of loans, secured and unsecured. Your credit score is also determined after considering the credit composition of both these loans and the duration of their payment.
- Other factors- Many other factors affect your CIBIL score, including hard & soft inquiries, opening too many credit accounts, an increase in credit limits, and many other small factors.
What is CRED offering to its members? – CRED Products
Besides just being a credit card payment company, CRED has successfully launched various products and services to help its members with more.
1. CRED Pay
CRED has partnered with Razorpay to allow its members to make payments using the CRED coins. The platform claims to offer one-click checkout using the credit card already saved on CRED. This way, members save a lot of their money and get access to great deals and discounts. Besides, CRED members spend 40% higher than an average buyer. CRED always rewards its high-ticket clients with exclusive offers and extra rewards.
2. CRED RentPay
At this time, liquidity is a trigger for everyone. We often fail to pay our rent because of the unavailability of cash at the moment, but CRED has you covered. Here, you can easily put in the details of your landlord and pay your rent using a credit card and UPI. When you make payments using CRED, you get to save a lot of money, depending upon the rent.
3. CRED Store
When we say CRED is one of its kind apps, we mean it. Before CRED, buying things through credit cards was boring, but now we can access premium deals in the CRED store. Here, you can utilize your CRED points and shop from over 500+ brands. Just like last year, CRED is offering ‘CRED Power Play’ where you can get 100% cashback in payment made during power play overs in the IPL.
4. CRED Stash
CRED is one such platform that keeps its user’s needs at the top. The platform recently launched CRED Stash to help Indians get quick money to initiate a payment without complications and hidden charges. CRED Stash provides users with a limit to pay up to Rs 5,00,000. The members have to complete their KYC to proceed with any such payment in CRED Stash.
5. CRED Mint
CRED Mint is another investment product that lets users invest money ranging from Rs. 1,00,000 to Rs. 10,00,000 and earn interest up to 9%. This has been given exclusively to CRED members under the partnership CRED and Liquiloans, a P2P NBFC registered under RBI. At any point in time, the members can invest or withdraw their money from CRED Mint, which would be credited within 24 hours.
6. CRED Travel Store
CRED recently launched a Mega Jackpot Week, where users can buy tickets, book hotels, and earn CRED coins. These coins are then redeemable in any purchase made at the CRED store. Not just this, participating in jackpots could give users brand new iPhones, Harley Dawkins, TATA Safari, Bitcoins, and even a complete makeover for not one but five years. CRED also partnered with Ixigo to offer five lucky winners free flights for five years.
Who thought paying credit card bills could be so much fun with such exciting rewards? Owing to such user-centric policies, CRED has come a very long way and is a big brand in the market.
Quick summary of CRED business model
- CRED has reached a market evaluation of 2.2 billion in just three years, becoming the fastest company to be called a unicorn.
- CRED works like a credit card payment company that helps users pay their credit card bills on time.
- But that’s not the USP of CRED. In return for setting their credit card payment, CRED offers them CRED coins that have dynamic value.
- So, the more people pay through CRED, the higher would be their CRED coin score.
- CRED has a very limited user base. It only accepts people who have a credit score above 750. In a country where few people use credit cards, CRED has filtered its user base to the core.
- The co-founder of CRED was previously the owner of Freecharge, a fintech company further occupied by Snapchat in 2600 crores.
- The marketing campaigns of CRED are the most unique. They have included Bollywood 90s superstars, targeting the age group of 25-40. CRED has very cleverly and entertainingly shown their brand as premium and not easy to get access to.
- CRED offers six major products, including CRED Pay, CRED RentPay, CRED Store, CRED Stash, CRED Travel Store, and CRED Mint.
- The platform also collaborated with thousands of big brands and financial institutions to provide excellent deals to its members.
- The revenue model of CRED is quite simple; it earns through CRED products, a listing of brands, third-party advertisements, giving away user’s data to financial institutions, and revenue via loans.
Related Frequently Asked Questions
1. Is CRED profitable?
Even after being a billion-dollar company, CRED had zero revenue in the last financial year of 2019. But, for users, CRED has turned out to be a blessing. It helps premium credit card holders pay their credit card bills on time and gain redeemable rewards.
2. Is CRED safe?
CRED is an RBI-approved platform, making it relatively safe for users. Besides, CRED keeps the safety of its users on top. The platform is hosted on a cloud platform on Amazon Web Services that provides a secure base to run the application safely. CRED follows various perimeter security, host security, data security, Incident, and Change Management, Vulnerability Assessment and Penetration Testing, and multiple Standards and Certifications to ensure that users’ data are in good hands.
3. What is the concept of CRED?
CRED is a credit card payment company that helps its members pay timely credit card bills. Additionally, the users of CRED also review rewards for each translation they make on the platform, which can be redeemed on CRED products and other offers available on the platform. CRED also provides CRED gems in return for a successful referral made.
4. What is CRED used for?
CRED is used for paying credit card bills in exchange for CRED rewards that can be redeemed on the platform itself.
5. What is the business model for CRED?
CRED’s business model is quite simple. It targets a premium class of Indians that uses credit cards. The platform has a policy of only allowing members that have a credit score of over 750. So, when these people make payments, the platform earns through transactional fees. As CRED offers various products and lists big brands on the app, it earns whenever a user buys through CRED.
6. Why is CRED so successful?
The success ratio of CRED is because of its targeted strategies. The brand is on-point with knowing to whom they are targeting. Plus, CRED’s credit card payment feature is handy for such premium users who actively indulge in using credit cards.
CRED has become a big brand in such a short span. It is one of the trusted platforms for credit card payment, and the fact that you get rewards in return is itself a head-turning USP. With the rising demand for credit cards in the Indian market, more people are joining CRED. Kunal Shah is one of the famous entrepreneurs because of his strong grip on the fintech industry. He has always thought big, whether it was Freecharge or now CRED.