CRED Business Model | How Does CRED Make Money?

Not many things out there can match the convenience that comes with a credit card. After all, what can be better than spending money, money that you don’t have to hold or carry in your wallet? Moreover, we hover around, get 6-7 weeks to pay back the same, and then also earn rewards, discounts, or cashback on it. Well, these instruments are designed in such a way that they keep you hooked.

Kudos to the noble banks and fintech players, but then – every boon comes with a T&C. Founded in April 2018 by Kunal Shah, CRED has emerged as a pivotal fintech platform that redefines the way credit card payments, rewards, and management are perceived across the nation.

This platform stands out by prioritizing the credibility of its users, employing credit scores as a criterion to curate a community of trustworthy individuals, thereby simplifying the credit card bill payment process and rewarding timely transactions with exclusive offers and discounts.

With a robust user base of almost 16 million and a valuation soaring to $6.4 billion as of June 2022, CRED's trajectory reflects its groundbreaking approach to imbibing a gated ecosystem that benefits both individual lenders and financial institutions by ensuring a circle of high trust.

CRED's business model, which pivoted the startup to the much-coveted unicorn status within just over two years of its inception, has been simple yet phenomenal. The USP revolves around offering a meticulous balance between user convenience and enticing rewards. The platform allows users to effortlessly manage their credit card bills, track expenses, and avail themselves of P2P lending at competitive rates, and by doing so - the Fintech major not only enhances financial health but also ingrains a culture of financial responsibility.

The platform's focus on amplifying user value through exceptional rewards for responsible financial behavior, coupled with its strategic partnerships for exclusive deals, sets a precedence in the CC payments space, accentuating the importance of credibility and trust in the digital era.

In this article, we will be exploring the CRED business model and understanding how CRED makes money and what is its revenue model.

What is CRED?
Understanding the CRED Business Model - How Does CRED work?
CRED Revenue Model - How Does CRED Make Money?
Decoding the CRED Revenue Streams
CRED's Value Proposition to Users
Challenges and Opportunities

What is CRED?

CRED, established in 2018 by Kunal Shah, is an innovative Indian fintech company that offers a reward-based credit card payment application. It started with the idea of targeting creditworthy individuals, specifically those with a credit score above 750, ensuring a community of high trust. However, with time – the credit card payment enabler has become more lenient when it comes to profiling individuals. The platform verifies new members by checking their credit scores with major credit bureaus such as CIBIL, Experian, and CRIF, requiring only their full name and a valid Indian mobile number for initial setup.

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Key Features and Services of CRED

• Credit Card Payment and Management: CRED simplifies the management of credit card expenses by providing a detailed analysis of spending patterns and efficiency, which aids users in better financial planning.
• CRED Protect: An AI-driven feature, CRED Protect, offers automated monitoring of credit card payments, sends due date reminders, and analyses spending habits to prevent fraudulent transactions.
• Rewards System: Upon paying their credit card bills through CRED, members gain access to exclusive rewards such as event tickets, experiences, gift cards, and premium upgrades from well-known brands like Diesel, Perfora, The Man Company, AJIO, Myntra, and others.
• Additional Financial Services: Besides basic card management, CRED has expanded its offerings to include house rent payments and short-term credit lines, providing more comprehensive financial solutions.

User Impact and Market Presence

• User Base and Transactions: As of 2021, CRED has processed approximately 20% of all credit card bill payments in India, with a user base exceeding 5.9 million. The market share has continued to soar and grow.
• Investments and Financial Health: Supported by major investors like DST Global and Sequoia Capital, CRED has raised significant funds to fuel its growth, despite reporting substantial losses in 2020 due to aggressive marketing and advertising strategies.
• Strategic Acquisitions: In its pursuit to broaden its service spectrum, CRED has acquired startups like Happay, focusing on expense management, and HipBar, a liquor delivery service.

CRED continues to upscale its platform with features that promote good creditworthiness and financial discipline while rewarding creditworthy behavior, positioning itself as a cornerstone in India's fintech scene.

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Understanding the CRED Business Model - How Does CRED work?

The business model of CRED revolves around creating a seamless experience for credit card users while partnering with businesses to provide exclusive rewards and incentives.

Three Pillars of the CRED Business Model

• CRED's Customers: CRED's customers are an essential component of its business model. While many people use payment apps or log in to their bank accounts to pay their credit card bills, CRED provides an attractive alternative by offering rewards and incentives. As more people use CRED to earn benefits, they share those benefits more widely, creating a network effect that strengthens CRED's position in the market.
• CRED App: The CRED app is a key component of its business model. The app provides users with a user-friendly interface to see all the available offers for paying their credit card bills. As users continue to pay bills, they accumulate CRED coins, which they can redeem for rewards.
• Businesses That Provide Offers On The App: This is another important pillar of CRED's business model. By bringing businesses on board and forming tie-ups with them, CRED provides small and large businesses alike with visibility as buyers of all types use the app. This partnership is beneficial for businesses, as it allows them to increase their customer base and revenue while also providing users with more rewards and incentives to use the app.

CRED Revenue Model - How CRED Makes Money?

The progressive business model of CRED leverages multiple revenue streams to create a robust ecosystem for creditworthy users. Here's a detailed breakdown of how cred makes money:

Revenue from Business Listings

• Businesses pay to display their products and offers on the CRED app, generating significant listing fees for the platform.

Transaction-Based Earnings

• CRED charges a processing fee ranging from 1 to 1.5% on various transactions, which includes payments made through CRED pay.
• Additional revenue is earned through commissions on sales from advertisements optimized to encourage spending on the platform.

Interest and Commission from Financial Services

• The platform earns interest on loans provided through peer-to-peer lending and CRED Stash.
• A commission is also earned from transactions where users redeem CRED coins for offers from partnered brands.

Diverse Financial Offerings

• CRED's array of services, such as CRED Pay, CRED Store, and CRED Escapes, ensures a broad base from which to draw revenue, ranging from payment processing fees to premium subscriptions.

Strategic Revenue Sharing

• A revenue share is obtained from partnered brands when users redeem points for rewards, integrating user engagement with profitability.

Thus, by focusing on a trust-based model, CRED not only secures a high-engagement user base but also creates a profitable framework through diverse revenue channels, making it a unique player in the fintech space.

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Decoding the CRED Revenue Streams

Let's decode the revenue streams of the Shah-led company and understand how they make the revenue model of CRED a big-time success.

Revenue Composition and Growth

Primary Revenue Sources

CRED's positioning revolves around multiple income streams that the neo-fintech player has figured out, over the years. The majority of its income, nearly 90% – is derived from three key services: CRED Cash, Cred Max, and various insurance products. These services cater to the essential needs of the platform's creditworthy user base, ensuring a steady influx of revenue.

Operational Revenue Enhancement

CRED saw its operating revenue grow by 71% to INR 2,397 crore in FY24, up from INR 1,400 crore the previous year.

Including other income, CRED’s total revenue increased by 66%, reaching INR 2,473 crore in FY24, compared to INR 1,484 crore in FY23.

However, despite the rise in revenue, the company’s net loss expanded by 22%, reaching INR 1,644 crore in FY24, up from INR 1,347 crore the previous year. CRED noted that its operating loss decreased by 41%, dropping to INR 609 crore from INR 1,024 crore in FY23.

For the fiscal year 2023, CRED reported a substantial increase in operational revenue, which grew by 3.5 times to reach INR 1,400.6 crore, up from INR 393.5 crore in the previous fiscal year. This growth highlights the effectiveness of CRED's business strategies and its ability to monetize its services efficiently.

Fee-Based Earnings

CRED capitalizes on transactional processes by charging a processing fee of approximately 1-1.5% on various transactions made through the platform. Additionally, the platform earns fees when users select offers from the 'Discover' section, further augmenting its revenue.

Interest Income and Financial Services

A significant portion of CRED’s revenue also comes from interest earned on peer-to-peer lending and CRED Stash, which provides an instant credit line to customers. This not only diversifies CRED's revenue streams but also enhances user engagement by offering financial solutions within the app.

Strategic Financial Management

Despite a notable increase in revenue, CRED's total operating expenditure, including one-time costs, amounted to INR 3,082 crore in FY24. Whereas, the company's total expenditure rose by 66.4% to INR 2,832 crore in FY23 from INR 1,702 crore in FY22. The company has strategically reduced marketing and promotional expenses by 26.8% to INR 713 crore in FY23 from INR 976 crore in FY22, focusing more on direct integrations with banks to lessen payment processing charges. Through the continuous evolution of financial strategies and optimizing its service offerings, CRED is not just sustaining but also significantly strengthening its fiscal footprint in the competitive fintech arena.

CRED's Value Proposition to Users

CRED's value proposition uniquely intertwines convenience with rewards, offering a robust platform for creditworthy individuals to manage their finances effectively and enjoy exclusive benefits. Here's how CRED business stands out:

• Rewards for Financial Responsibility: Users earn rewards for timely credit card payments, which not only encourages punctual bill settlements but also aids in maintaining a healthy credit score.
• Suite of Financial Management Tools: With features like CRED Protect and Smart Statements, users can effortlessly monitor transactions, identify discrepancies in their credit reports, and initiate disputes to correct them, ensuring financial accuracy and security.
• Exclusive Access to Deals and Offers: Membership in CRED opens doors to curated deals and premium packages, allowing users to make significant savings on various purchases, enhancing the shopping experience, and providing real value for money.
• More Payment Options with CRED Max: Beyond credit card bills, CRED Max enables users to conveniently pay for rent, utilities, insurance premiums, and even subscriptions, simplifying the management of regular expenses.
• Better User Experience: CRED's interface is designed for ease, making financial transactions not just simple but enjoyable. This focus on user experience helps retain members and fosters long-term loyalty.
• Security and Privacy: All personal data and transactions on CRED are securely encrypted, ensuring that users' financial information remains private and protected.
• Appealing to Diverse User Needs: CRED appeals to a broad segment of financially savvy users, from those seeking to improve their credit scores to privacy-conscious consumers, all finding value in the platform's offerings.

Understanding user needs through innovative features and maintaining a high standard of security has led CRED to successfully deliver a compelling value proposition that resonates with its target audience.

Challenges and Opportunities

Competitive Scenario and Differentiation Challenges

• Operating in a Crowded Market: CRED operates in a highly competitive digital finance market in India, where numerous loyalty programs vie for consumer attention. Establishing a distinct presence amidst this crowd poses a significant challenge for how CRED works.
• Effective Communication: The crucial task for CRED is to effectively communicate its unique value proposition. Many potential users are already familiar with traditional loyalty rewards programs, making it imperative for CRED to highlight its differences and benefits clearly and persuasively.

Competition and Market Positioning

• Facing Established Giants: CRED encounters intense competition from well-established players in the payments and financial services sector including the likes of companies like Gpay, and PhonePe among others. These competitors offer similar services, which necessitates CRED to continually innovate and offer superior value to retain and attract users.
• Differentiation Strategy: To stand out, CRED needs to keep differentiating itself through unique features, exceptional user experiences, and tailored services that resonate with its target audience of creditworthy individuals. It is even trying to do so, by constantly gamifying the platform with animated contests among others.

Future Prospects and Strategic Focus

• Sustainable Monetisation: While CRED has successfully attracted a large user base and built a strong brand, the ongoing challenge is to monetize this base in a sustainable manner. The focus must be on creating long-term value for users without compromising upon profitability.
• Playing Upon Brand Strength: CRED's future prospects will heavily rely on its ability to make the most out of its brand and user trust to introduce new revenue-generating services and expand its market reach without compromising on user experience or data security.

CRED needs to address these challenges and capitalize on opportunities. If done in the right way, the CC leader can continue to enhance its market position and achieve sustained growth in the long run.

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End Note

Looking ahead, the road for CRED is both challenging and ripe with opportunities. As the platform continues to hover through the market dynamics and explores sustainable monetization strategies, its innovation-led approach will be crucial. The significance of the CRED business model lies not just in its current achievements but in its potential to shape future financial behaviors and market trends.

Consequently, the broader implications of the company's success extend far beyond its immediate ecosystem, potentially influencing the global fintech dream and offering insights into the power of trust and reward in building a financially responsible society.

FAQs

What does CRED do?

CRED is an innovative Indian fintech company that offers a reward-based credit card payment application.

How does CRED make money?

CRED's revenue comes from fees charged to businesses for the privilege of showcasing their products and offers on the CRED app. In addition, CRED earns money from transaction-based earnings, interest and commissions from financial services, and diverse financial offerings.

What is the CRED membership process?

To make the most out of CRED, you must have a credit score (CIBIL) of 750 or simply own a credit card. Upon joining, CRED will request permission to access and verify your credit score from credit bureaus such as Experian, CRIF, and CIBIL to assess what services it would extend to you, based on your rapport.

What issue does CRED aim to address?

CRED was born out of Kunal Shah's challenges with managing multiple credit cards. The platform aims to tackle the issue of late payments on credit card bills, which can lead to accruing interest and damaging one's CIBIL score. CRED provides a solution by helping users manage their credit card payments more efficiently.

How does the CRED app work?

CRED is a credit card bill payment app that rewards users with cashback and discounts for timely payments. Users link their credit cards, pay bills through the app, and earn perks from various brands. The app also offers credit score tracking for financial monitoring.

Is CRED a profitable company?

CRED saw its operating revenue grow by 71% to INR 2,397 crore in FY24, up from INR 1,400 crore the previous year. Despite the rise in revenue, the company’s net loss expanded by 22%, reaching INR 1,644 crore in FY24, up from INR 1,347 crore the previous year.

What is the CRED revenue model?

The revenue model of CRED involves revenue generation through diverse channels, including, Revenue from Business Listings and Financial Institutions, Transaction-Based Earnings, Interest and Commission from Financial Services, Diverse Financial Offerings, and Strategic Revenue Sharing.

What are the important pillars of the CRED business model?

The business model of CRED is built on three pillars - its customers who pay credit card bills, the CRED app, and the businesses that provide offers on the app.

How Cred Works?

CRED is accessible only to individuals with a credit score of 750 or higher (CIBIL). The app verifies your credit score by requesting access from credit bureaus such as Experian, CRIF, and CIBIL. If you meet the eligibility criteria, CRED allows you to link your existing credit cards to your account.