Dissecting CRED’s Business Model

Dissecting Business Model of CRED

Think of IPL 2020 and think of CRED! We were literally bombarded by this company’s advertisements throughout the series. Curious to understand its business operations? Well, let’s find out.

Crux of the Matter

What is Cred Into?
Founded by Kunal Shah (also a co-founder of FreeCharge) in 2018, CRED is a Bangalore based fintech startup offering rewards to its customers who pay their credit card bills using its platform. It came to the maximum light by becoming the official partner of the 2020 IPL season.

Business Model

  • Step 1: To use CRED’s platform, an individual has to give access to his/ her credit information to the company.
  • Step 2: Cred processes the information provided through a credit rating agency CIBIL. An individual with a minimum of 750 credit score is availed with its membership.
  • Step 3: Uses AI-backed systems & statistics to keep track of an individual’s entire credit card payment journey.
  • Step 4Rewards users for making Credit Card bill payments through its platform.

How Does It Earn?

  • For the early phase, CRED’s focus was on achieving scale rather than opting for revenue generation.
  • They deliberately wished to expand their cream customer base in the first leg of their operations.
  • Resultantly, in the year 2019, their expenses stood at ₹64 crores with absolutely zero revenue.

Avenues For Revenues

Product & Offer Listing Fees:

  • CRED has partnered with various businesses whose product offerings would be listed on its application. 
  • Whenever a member opts for redeeming the CRED coins from the app, the business pays fees to CRED for directing customers to them.

Data Monetization:
CRED members are usually prone to be the affluent ones. With such niche data collection, CRED can easily monetise data by availing them to various financial institutions.

Launching Lending Products:
(A) Rent Pay:

  • To pay recurring household expenses & monthly rent payments.
  • CRED would charge a fee from its members who opt for this service.

(B) Credit Line:

  • Offered to the customers in association with banks and other institutions with interest at 1/3rd the market rate.
  • CRED will get a revenue share from the credit line offering.

CRED In News
CRED recently raised $81 million in its Series C funding round and bought shares worth $1.2 million from its employees. Employees holding shares in CRED were able to sell up to 50% of their ESOP’s (Employee Stock Ownership Programme)in the funding round.

  • Stock options are also used as golden handcuffs if their value has increased drastically. Golden handcuffs, a phrase first recorded in 1976, refers to financial allurements and benefits that have the objective to encourage highly compensated employees to remain within a company or organization instead of moving from company to company.
  • CRED’s ads starring iconic celebrities from the 90s during the IPL 2020 made the startup trending on Twitter during its campaign. The company has registered six to seven times increase in daily sign-ups after the company released its IPL campaign. Shailendra J Singh, Managing Director at Sequoia Capital, who is the investment advisor with the payment app, tweeted about the feat.
  • On 8 April 2015, Snapdeal acquired Freecharge, in one of the biggest take over in the Indian e-commerce sector so far. The deal was for approximately $400 million as cash and stock. On 27 July 2017, Axis Bank acquired Freecharge for $60 million.