Consider an app that collects all of this information, sends you reminders to make timely credit card payments and even rewards you for it. This is where CRED comes into play.

CRED is a lifestyle platform that rewards its users with CRED coins for making credit card payments through its app. It significantly reduces the hassle of managing multiple credit cards by making the process extremely simple, easy, and convenient.

The platform enables members to keep track of their payment journey, providing due date reminders, alerts on hidden charges, and insights into their spending patterns based on usage across categories.

Cred members can use these “Cred coins” to win exclusive prizes such as curated products, experiences, event tickets etc.

By the end of this blog, You will have a good sense of...

  • What is CRED
  • How does it work
  • CRED Business Model
  • How does CRED make money

So, without further ado, Lets dive straight in!

CRED's Founding Story

Kunal Shah founded CRED in 2018 and frequently refers to it as a TrustTech startup rather than a FinTech. Because of his motivation to address trust issues in Indian society, which he believes is the key to economic prosperity.

Kunal began his entrepreneurial journey with PaisaBack, a website that provides cashback, coupons, and other offers to users. However, he eventually closed it down to found FreeCharge in 2010 along with his Co-Founder Sandeep Tandon.

FreeCharge was acquired by Snapdeal in April 2015 for ₹2,800 crores in cash and stock deal. While this was one of the largest exits for an Indian startup at the time, the company was later sold to Axis Bank in 2017 for $60M.

Kunal left the firm the following year taking a break from Entrepreneurship. In 2016, he joined Y Combinator (an American technology startup accelerator), as a part-time partner.

Later he served the Internet and Mobile Association of India as chairman, as well as an advisor to Sequoia Capital, The Times Group, and Angellist.

After three years of lying low, Kunal Shah announced the launch of a new venture Cred on Twitter on November 5 2018. He explained Cred as “a platform to celebrate and reward the most creditworthy people of India.”

Within 3 years, CRED becomes a valuable network of affluent individuals using the platform for multiple financial use cases.

In one of his interviews, Shah explained how the idea of Cred was based on two insights:

  • First, he wanted to build something that would benefit taxpayers, the nation-building minority.
  • The second was that the audience he wanted to target loved their credit cards, but nobody was building good products for them.

This led to the creation of the core platform, which enables CRED members to manage all their credit cards in one place.

CRED's Growth Stats

  • CRED has amassed over 7.5 million+ members. The company claims that it processes approximately 25% of all credit card bill payments in India, While 35 % of premium credit cardholders in the country are on CRED.
  • According to CRED insights, users on the app spent nearly Rs 39,490 crore in 2021 while paying for utilities, shopping, food etc. The months of August (Rs 1,750 crore) and September (Rs 1,727 crore) saw the most food and beverage transactions and payments, while October continued to see an increase with 1,427 crore spent.
  • During November'21, 40.24% of CRED members improved their credit scores, 200 Cr worth of hidden charges were detected using CRED Protect and 36 Cr worth of cashback was won by members for taking the right financial decisions.
Cred in numbers- Cred Business Model

CRED’s Target Audience

The platform primarily caters to affluent Indians (~110 million), who account for $1 trillion of India's GDP.

These people generally own expensive phones (e.g iPhone), earn over 10L per annum, prioritise convenience, go for foreign trips, send their children to elite private schools, frequently use D2C products & credit cards.

CRED only accepts consumers with credit scores (a numerical rating that evaluates a person's tendency to repay a debt) of 750 or higher That’s why not everyone gets it :)). Borrowers with lower credit scores are charged a higher interest rate while having lower chances of credit card or loan approval.

Getting a Credit score above 750 is not that easy. An Individual need to pay bills on time, pay off credit card debt, use only a portion of the credit made available to him and avoid applying for every credit card he sees

This somewhat explains the reason why CRED is only allowing users with a high credit score.

Usually, high credit score users repay the entire outstanding amount on time and are not charged any interest. The idea is to build a network of trustworthy individuals where members can do any kind of transaction amongst each other.

The user’s who didn’t have a credit score >750 are put on a waitlist, where they can learn to improve their credit scores.

On the other hand, it’s challenging & costly for D2C brands to target an affluent consumer base via traditional online/offline advertisements because a significant portion of ads are covered by consumers who they aren't targeting.

CRED gives these brands access to its member base, who have a high lifetime value and drive the majority of consumption across most platforms.

Meanwhile, CRED Pay helps established merchants increase ticket sizes by enabling seamless credit card payments. This results in a win-win situation in which a direct-to-consumer channel connects merchant partners and CRED members through platforms that provide a seamless payment experience.

CRED's Other Products

Going beyond Credit Card payments.

  • CRED pay: It helps members to utilise their CRED coins for cashback by taking advantage of deals on their favourite merchants across various categories using credit cards saved on the CRED app.  

    The feature saves its users the time and effort of visiting multiple e-commerce sites, searching for products or deals, and entering payment information each time.
  • CRED Cash: Launched in partnership with IDFC bank, CRED Cash give its users access to instant credit up to ₹5L without any forms, phone calls or physical visit. Users are charged interest on the amount withdrawn.

    Members have grown to trust CRED cash for an emergency fund since its launch. It had a loan book of Rs 2,000 crore in August 2021 with an NPA ratio of less than 1%. NPA ratio means nonperforming loans, (loan remained unpaid for over 90 days) as a percentage of the Employer's total assets as of the last day of the Plan Year)
  • CRED Mint: It allows its users to lend money and earn interest rates of up to 9% per year, which is significantly higher than savings accounts and other traditional forms of deposit.

    The investments made in CRED Mint are to be lent out through CRED Cash. That means, CRED members can lend their hard-earned money to other creditworthy individuals like them. Lenders can invest between ₹1,00,000 and ₹10,00,000, and earn returns for the period invested.
  • CRED Max (Earlier RentPay): Members can pay their landlords' monthly rent with their credit cards. Although, CRED does charge a small service fee for the service (up to 1.7 %).
  • CRED Store: CRED has partnered with a variety of companies in a variety of industries, including health, travel, and e-commerce, to allow users to spend their CRED coins and receive offers and discounts when purchasing these products and services through the platform.

    It has partnered with over 2000 brands to provide customers with CRED exclusive prices that they can easily access through the CRED store. This also helps those businesses increase their visibility and sales by having a presence on the app.

CRED also has two unique features that users say are a big help: "Card Protect" and "Smart Statements," These features analyse users’ spending patterns and alert them to any unauthorised fees charged to their card.

CRED's Market Scenario

CRED focuses on top-tier premium consumers, who account for 1/3rd of total consumption in the country.

The strategy is to concentrate on a high average revenue per user (ARPU) model, where the consumer has progressed beyond online bookings & seeks more advanced forms of convenience.

According to the latest Reserve Bank of India data, credit card spending in India increased by 57% year on year in September 2021 to Rs 80,000 crore. Despite a high base of Rs 77,981 crore in August, this represents 3.2 % sequential growth.

On the other hand, the average monthly spending on a credit card increased to about Rs 12,400 from Rs 10,700 earlier, brokerage firm Motilal Oswal said in a report.

Two primary reasons for the growth in credit card spending.

  1. Increasing cardholders: Nearly 1.1 million new credit card additions during September, taking the number of outstanding credit cards to 6.5 crores.

    The return of India's largest credit card issuer, HDFC Bank, to the market after an eight-month absence was one of the primary reasons for the increase in new card additions.

    The RBI lifted the ban on HDFC Bank issuing new cards in mid-August. Since then, the bank has been on an aggressive campaign to reclaim the market share it lost during that time.
  2. Increasing dependence on shopping online: During Lockdown in 2021 & 2021, the reliance on online shopping grew, even in non-metro cities.

    Spending was even higher in October, as e-commerce platforms such as Flipkart and Amazon held their annual festival sales in the first week of the month.

    Co-branding of these platforms with banks for offering cashback while shopping boosted the usage of credit cards. Amazon Pay has tied up with ICICI Bank, while Flipkart collaborated with Axis Bank.

    Over the last few years, e-commerce websites have partnered with merchants to offer minimal interest on purchases that are converted to EMIs. This has increased the purchasing limits of consumers, leading to steady spending on finances.
Infographic showing CRED's journey and milestones between 2018 and 2022
Cred Story- Cred Business Model

How CRED makes money?

A million-dollar question everyone is asking is how Kunal Shah is monetising CRED? Let’s discuss three ways CRED is making money:

  1. Product/Offer Listing Fees: CRED charge a fee from brands to list their products on the 'Discover' feature where the users can spend CRED coins to avail discounts.
  2. Rent Pay Commission: As discussed earlier, CRED charges a fee of approximately 1% to 1.7 % by allowing members to pay monthly rent with their credit cards- including large rent instalments, and EMI for an education loan.
  3. Earning from Loan disbursal: CRED earns 1-2% commission from its lending partner IDFC Bank on each loan disbursement, as stated by Entrackr  in one of their article.

While offering its services, CRED collects a lot of valuable data about an individual. The data includes but is not restricted to monthly spending on Credit cards, Spend Patterns, financial statements, repayment capabilities etc.

Even their website acknowledges the fact that the platform uses algorithms to access user spending habits by reading emails from banks & credit card issues.

It may be possible that CRED’s could open more monetisation channels by using data collected from their users. Fintech companies, banks and brands could use this data to offer products or services based on the user’s financial profile and spending history.

CRED’s Marketing Strategy

CRED has successfully positioned itself as a stylish and aspirational luxury brand. Few comparable startups in India have accomplished this in such a short period.

Although companies from Amazon to Paytm has competitive products, there is a low brand recall for anyone other than CRED for credit card payments.

Let us discuss strategies and tactics used by CRED, that have caught the world’s attention for their quirkiness.

CRED’s “famous” IPL ads: Cred has been an associate sponsor of the Indian Premier League (IPL) for three seasons.

CRED began its TV ad campaign in 2020 IPL, featuring stars from 90s Bollywood auditioned for a CRED ad. The idea behind these ads was to use cringe-worthy and humorous methods to raise brand awareness while also pitching the audience to download the app.

When Cred releases an advertisement, the actor who starred in it shares it on his Twitter account, resulting in an increasing amount of reach.

But why CRED is running TV ads targeting the masses, not just affluent individuals?

To attract a new demographic of credit card users possible from Tier-2 and Tier -3 towns. Generally, these users are far removed from the startup/corporate ecosystem that provided CRED with its early adopters.

These ads are seeking the attention of Generation Y i.e people between the age group between the ’30s and 40. That’s why you see Rahul Dravid, Kumar Sanu, Anil Kapoor in their ads, not Virat Kohli, Alia Bhatt or Varun Dhawan.

Every ad has two things in common: uniqueness and the ability to create brand recall. And that's what CRED is optimising for.

Contests and Incentive Programmes: For acquiring its early adopters, CRED sent cakes and Gift boxes to existing users who were employees in popular brands like Netflix and co-working spaces like WeWork. This was surprising and unexpected for people and they started bragging about CRED on social media generating word-of-mouth publicity.

During IPL 2021 Cred launched the “Mega Jackpot” contest. The idea behind this campaign was to allow its users to participate and win jackpots. CRED gave away seven different prizes to winners, including gold, Harley-Davidson Fat Boys, a brand-new iPhone, free flights for five years, a TATA Safari car, a complete home makeover, and a Bitcoin.

Cred Rewards- Cred Business Model

Moreover, Cred had rightly managed to cash in on the bitcoin trend as the launch of this campaign coincided when Bitcoin was trading at its all-time high & was the hot topic all over the world.

Near Christmas, CRED rolled out its Cheer Days campaign to endorse and reward responsible financial behaviour.

To make things more interesting the campaign featured Indian Actress Deepika Padukone, hosting daily activities and jackpots where members will stand a chance to win exclusive gifts ranging from items that are part of the actor’s closet to bitcoins. CRED members can win rewards and cashback worth over ₹100 crores.

Just like any other CRED’s campaign, all these campaigns created a buzz both on news channels and social media.

Social Good campaigns: Marketing campaigns that champion a social issue are becoming commonplace as advertisers look for ways to create emotive & shareable content. CRED piggybacked on this kind of marketing not once but many times.

Cred partnered with Bhumi and GiveIndia to launch an initiative to plant 500,000 trees. The users can log in to Cred App and pick the number of trees they want to contribute. Even though we don’t have the exact results of this campaign, Kunal Shah revealed in a tweet that CRED was able to achieve 87% of their desired goal.

During COVID-19 deadly second wave, CRED committed to distributing 1 billion litres of oxygen via oxygen concentrators to hospitals and healthcare non-profits across the country.

The company stated that for every 10,000 CRED coins redeemed by its users, 1,000 litres of oxygen will be distributed via concentrators. The funds raised will be transferred to Milaap, an online fundraising platform for medical emergencies and social causes.

CRED reported that 7.5 lakh members have used their CRED coins & helped deploy funds of Rs 10 crore to organisations such as Milaap, Hemkunt Foundation, and Give India.

However, a few people questioned and alleged that CRED’s math doesn’t add up well.

CRED’s Funding and Valuation

Cred has raised a total of $722.2 million in funding throughout its eight rounds.

The company's most recent Series E funding round was co-led by its existing investors, Tiger Global and Falcon Edge, on October’ 21.

Other investors who participated in the Series E round of fundraising included DST Global, Insight Partners, Coatue, Sofina, RTP, and Dragoneer. Meanwhile, Cred has added two new investors to its roster: London-based Marshall Wace and Steadfast Venture Capital.

The company plan to use the funds to grow its range of products and expand financial services offerings for its customers.

The Kunal Shah-led venture has raised $466 million in 2021. The company was valued at $4.01 billion during its latest round in October.

As per reports, CRED is in late-stage talks to raise around $250 million from some new investors from the Middle East region along with internal investors.

CRED’s Revenue and Financials

CRED projected a 208X increase in operating revenues to Rs 108 crore during the fiscal year ending March 2021, according to documents submitted with its regulatory filings. These figures do not come from audited statements because CRED has not yet filed them for FY21.

During February 2021, CRED has posted operating revenue of Rs 52 lakh by spending Rs 378.4 crore FY20. On a unit level, CRED spent ₹726.7 to earn a single rupee of operating revenue during FY20.

The reason behind mind-boggling losses is excessive cash burn on User acquisitions and brand development to get new customers and trigger scale. The company’s spending on advertising and marketing accounted for 47.6 % of total expenses.

Even after acquiring an affluent base with a high willingness to spend and consume, CRED hasn’t been able to monetise its user base well in F20.

Although, Kunal Shah already gave the reason why CRED is not making profits during an Instagram AMA.

Cred Revenue- Cred Business Model

CRED’s Acquisitions

CRED made its first acquisition in October’21 by acquiring Chennai- based alcohol payment and delivery startup HipBar which owns a prepaid payment instrument (PPI) licence.

With the acquisition, CRED might be able to begin offering cashback in its wallets rather than in user bank accounts and card accounts by leveraging the Hipbar PPI license.

CRED had expanded into e-commerce, lending, payments and now investment segments after its second acquisition, a non-banking finance company Parfait Finance & Investment in November’21.

The purchase of a finance company indicates that the fintech startup is eager to expand its presence in other financial services spaces may become a Fintech super app.

CRED already provides loans to approved users but only through collaboration with IDFC First Bank. In August, Cred's lending product had a loan book of Rs 2,000 crore with an NPA ratio of less than 1%.

Just a few days after the Parfait deal, CRED confirmed the news to acquire Happay in a cash-and-stock deal.

Happay is an enterprise expense management & reporting software that assists employees in auto-populating receipt and invoice data from multiple sources. At the time of acquisition, Happay serves 6,000+ businesses, managing work-related expenses for over 1 million users globally.

The founders of Happay, Anshul Rai and Varun Rathi will continue to operate independently but work closely with Cred’s leadership to leverage its ecosystem, build distribution and expand product offerings.

With professional expenses accounting for a sizable portion of credit card spending, incorporating professional expense management into the Cred ecosystem is a logical extension of the CRED proposition.

CRED’s Possible Growth Plans

Until now, CRED heavenly focussed on two things: User acquisition and brand building. Their strategy seems obvious, grow CRED market share that may open the door to multiple revenue streams. Although acquiring affluent users with high credit scores doesn't equate to high spending on the platform.

CRED may expand into verticals where members can interact & engage with one another. This could mean that a CRED member decides to rent their home only to other CRED members, trade with one another, or build stronger personal networks with trusted individuals.

As per report, CRED might be looking to make a series of acquisitions to become a full-fledged financial services provider, with ambitions of eventually becoming a bank.

The company was also in talks to acquire Dineout and Wint Wealth, as it seeks to offer more services to its over 7.5 million users. However, the deal has not been confirmed yet.

While CRED has been boosting its commerce play by onboarding multiple D2C brands on its platform, dining out could be an additional area where its users can transact on the app using CRED's wallet or UPI modes of payment.