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Understanding Cred’s Credibility factor and Business model

The medium of exchange among mankind has grown over the years. From the barter system in the earliest centuries to livestock and then the coins made from precious metals. As the model countries have been accepted, the medium of exchange has been fiat currency issued by the government or the central bank of a particular country.

However, humans never stopped evolving and the emergence of the banking system gave birth to cheques, ATMs and plastic money such as credit cards and debit cards. Such easiness allows people to spend without hassles and problems. In such scenarios, the magic of credit cards makes its place, i.e. the art of purchasing in advance and paying for it later.

From a single card, users now have a bunch of credit cards, availed from various national or international banks with different features and schemes, making the system of payment simpler. However, the user has to remember the billing cycle of his cards, as each card would have a different billing cycle.

Now imagine there being an app which gathers all this information, sends you reminders to carry out timely payments and even offers you rewards for it. This is exactly where a start up like Cred steps in. This app becomes a single platform to handle all the credit cards.

Bengaluru-headquartered Cred was started in 2018 by Kunal Shah as a members-only application which facilitates its users with exclusive rewards for paying their credit card bills. With the passage of time Cred added features to allow users to make house rent payments and introduced short-term credit lines.

Cred has customers who have a strong credit score, the platform also has been tracking their bill payment behaviour. It can boast of a good set of borrowers whose chances of default are low. This can be a future growth prospect in terms of business revenue for Cred.

Kunal is a MBA dropout from Mumbai’s prestigious Narsee Monjee Institute of Management Studies. He gained moderate success with Freecharge, which was started after shutting down Paisaback. He left his role to begin with his own venture. However, his venture has been highly criticized by many startup magnets and entrepreneurial wizards.

Business Model
The business contemplates on three major divisions- The Cred app, Businesses which provides offers on the app and users who pay credit card bills. Cred provides better and bigger offers to the credit cards customers to pay bills via their platform.

In less than four years of operations, the company had onboarded over 5.9 million users and processed about 20% of all credit card bill payments in India. As of April 2021, CRED offered five distinct products – CRED RentPay, CRED Cash, CRED Pay, CRED Store and CRED Travel Store.

The platform has been established with the purpose of making credit card bill payments easier and to offer the users rewards upon timely payments. The application functions in a simple manner. It requires them to give their phone number to inspect their credit score through CIBIL, CRIF and Experian.

Cred earns revenue from the businesses list of products and offers on the app as it enables their visibility on the platform and draws a wide number of users’ attention and they tend to spend more time. This allows more offers to be placed over the numerous screens of the platform As a result, it gains more and more visitors to join and pay the bills.

Cred is trying to offer interesting products. That is where Cred has launched an ecommerce store and a rent paying facility. Two extremely valuable products for this category of customers. While an exclusive club is a good marketing buzz, getting customer engagement and driving valuations northwards.

Cred Store is an in-app purchasing platform, where consumers can buy curated products. Then it also launched Cred Rent Pay, with which consumers can pay their monthly rents through their credit cards. Imagine earning rewards on rental payments and redeeming them within the app itself.

Also its allied businesses around rent payments and ecommerce are not that exclusive either; they are used by almost every salaried professional who works in places such as Bengaluru, Noida or Mumbai. Cred, while claiming exclusivity, has also kept its products simple and usable.

Partnership with IPL
The growth of CRED’s platform has also largely been propelled by its marketing campaign amidst the recent editions of cricket fiesta of the nation- Indian Premier League (IPL). The three year deal (2020-2022) was signed at a hefty amount of Rs 120 crore.

The company has reported an increase in both its user base as well as on the funding it is receiving. The platform’s board director, Shailendra Singh tweeted that it has been registering a 6-7 times increase in new users since IPL began. The massive audience of the cricket tournament has definitely helped boost the popularity of the application.

Despite not making any money currently and aiming at facilitating personal loans in collaboration with banks and non-banking firms (NBFCs), CRED has been a buzzing phenomenon in the past couple of months, largely owing to the IPL, and has intrigued and sparked the interest of many of the audience.

Cred has been unable to achieve the status of a unicorn so far, but it is highly believed that in the next couple of rounds of funding, the startup will achieve the feat. Cred is recently valued at $0.8 billion or $800 million dollars.

So far, Cred has raised a total $256.5 million in funding in five funding rounds. The journey started in November 2018 when it raised $30 million from Sequoia Capital India, followed by an undisclosed amount from Rainmatter Technology.

In April 2019, the company raised Rs 180 crore and in July that year, Gemini Investments, Ribbit Capital and Sequoia Capital India invested $120 million in the company. Its recent fund came in November 2020 as it raised $81 million from DST global.

Criticism and Agony
Interestingly, Cred has no direct peer in the business so far, despite that it has been on the radar of the critics. Analysts and experts have raised multiple questions on the business model and sustainability of Cred. The lofty valuation and lack of a solid monetization plan has drawn criticism.

Cred’s advertising content and videos, often made in-house and featuring celebrities such as Rahul Dravid, Anil Kapoor, Madhuri Dixit, Govinda and Jackie Shroff and Udit Narayan, Kumar Sanu, Bappi Lahiri. They have generated large discourse in news and social media due to their unique advertising strategy, which has received both praise and criticism thus far.

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