CRED is an Indian fintech company founded by Kunal Shah who previously founded Freecharge. Freecharge too was a fintech company. CRED was Founded by Kunal Shah in 2018 and as of 2022 CRED has a valuation of more than $6.4 Billions!
But guys let me tell you another fact that CRED is still a massive loss making company. In fact CRED has received a lot of criticism for burning its investors money on giving massive cashbacks, rewards and on marketing for increasing its user base.
In fact according to Entracker, in the FY2020 Kunal Shah spent Rs. 727 to earn Rs. 1 That’s really a massive loss, so lets find out what is Kunal Shah’s strategy and how exactly CRED makes money.
What is CRED ?
CRED is an app via which you can handle your multiple credit cards and every time users pay their credit card bills on time they are rewarded for the good act. But why do you need an app for managing CREDIT CARDS, well those own multiple credit cards will understand the pain.
There are mainly three problems faced by Credit Card users which are:
- Hidden Charges
- Late Fees Charges
- Extra Interest
The Genius Data Game of CRED
As I told earlier that CRED is an app to manage credit cards especially for those who have multiple credit cards. But another important point to be noted is that not anyone with a credit card can just sign up to use the CRED app. You need a credit score of more than 750 to be a cred member. Sounds like a tough deal !
But Yes! Kunal Shah did this for a reason, guys the point is that only a few people get credit card in India as you need to have a good salary or income to get it. Let me give you some numbers.
As of October 2022 Out of total population of 1400 million only 79.36 million people owns credit card ! Just the the simple math, roughly 5.6% of the total population owns a credit card in India.
Now, out these 79 million people roughly 1% of them pays their bill on time and have a credit score of more than 750 and these are the customers CRED wants on its platforms. The top 1% club who have a credit score of more than 750 is the group who have really good incomes, consistently pay their loans on time and spends more money when compared to an average Indian.
This gentry is the target of many luxury brands like Apple, Nike, Gucci etc. They are the individuals every company looks to sell their products and services as they have more purchasing power than an average person.
Thus, Kunal Shah has created a community of high trust individuals with the help of CRED. Credit Card score was just a gate to filter this 1-2% of country’s top population.
The advantage of such a community is really uncountable, some of them are:
- Banks would love to give loans on CRED app as they individuals on CRED will most probably pay the loans on time.
- Advertisers would also love to sell their products on CRED as they have get better return by selling stuff to high worth individuals who have a good purchasing power.
- As it is difficult to get high worth individuals when it comes to selling luxury real estate, CRED could also act as a real estate mediator or middle man to sell luxury real estate on its platform.
- Other luxury brand such as organic food companies, travelling agencies, big event management companies can also tie up with CRED to acquire customers.
CRED Revenue Model - How CRED Makes Money ?
The three main pillars of CRED are its users/customers, the application(CRED app) and partnership with businesses.
Lets now discuss the 5 ways via which CRED is currently making money.
1. CRED STASH
CRED Stash is digital p2p (peer-to-peer) lending platforms where you can take loans from individuals like you and me, instead of any financial institution like banks. In this type of lending the lender charges an interest rate for providing loan to the borrower and CRED take its small commission for providing the service/platform from the lender’s profit.
2. CRED RENT PAY
Using CRED app users can pay their house/office rent for which CRED charges 1-1.5% transaction fees. Each time users pay there rent using CRED app they get CRED points which they can use for offers and deals on the CRED app.
3. CRED STORE (Partnership with Brands)
Whenever users pay their credit cards bill on time via CRED app they get some cred points which can be used by them on some deals available on CRED Store. Each time user buys any product using cred coins CRED gets some commission from the brand whose product is being sold.
4. Loans (Partnership with Banks)
Users can also take a loan from banks with the help of CRED app. Since, banks are always looking for customers who can take loans pay the installments on time CRED is a great platform for them as the CRED users have a credit score of more than 750 and thus there are much higher chances that they will repay the loan on time.
For each successful loan approval CRED takes 1% commission from the banks.
5. CRED PAY
CRED Pay was developed in partnership with Razorpay and Visa. It provides brands with a D2C channel, by offering them an instant payment experience on their platforms.
Currently these are the 5 ways which helps CRED to make money. We may see some more innovative ways in future on how CRED makes money.
CRED Financials
CRED has been increases its losses rapidly with each financial year although revenue is also growing but some are saying that company might find it difficult to turn profitable if it continues to burn cash in the same way.
CRED has spent a lot of money in marketing, in FY2020 CRED spent Rs. 57 crores on marketing while in FY2021 it increased its marketing expenses almost 4X reaching 222 crores.
FAQs:
When did Kunal Shah founded CRED?
CRED was Founded by Kunal Shah in 2018, having its headquarters in Bengaluru.
Is CRED app safe to use ?
Yes CRED app is 100% safe to use. It is a legitimate app approved by RBI (Reserve Bank of India).
What should be minimum credit score to use CRED ?
To use CRED app you should have a minimum score of 750. Only users with a credit score of more than 750 are eligible for becoming a CRED member.
Is CRED still loss making ?
Yes CRED is still a loss making startup. In FY2021 CRED posted a loss of Rs. 523.85 crores while in FY2022 its loss got more than double reaching Rs.1279 crores.