CRED Business Model: How Does CRED Make Money?
For how long have you as a person been using credit card? Looking back, what challenges have you faced using those credit cards?
For most credit card users the challenges usually include:
- The hassle of handling multiple cards
- The issue of making timely payments
- And clearing dues through cumbersome processes
For this reason, such people usually wish there is just a way to manage all the different cards much more quickly and conveniently. However, with CRED that problem eventually becomes nonexistent. Yes, that is the key problem CRED business model is out to solve. It is a fintech startup that provides a one-stop solution to all such payment problems. It does so by making the process tremendously simplified and seamless.
But it doesn’t end there. CRED actually provides extra reward for those that use it to make payments. That sounds incredible? So we are going to demystify the CRED business model and found out why it is able to do this and how it eventually makes money to become the unicorn it is today.
What is CRED?
CRED is an Indian fintech company founded in 2018 by Kunal Shah. It allows its users to make credit card payments through its app and get exclusive offers. Shah was motivated to create the platform to solve the ‘trust issues’ he believed were present in Indian finance. He wanted to create an ecosystem where credible individuals could connect and where lenders and other financial institutions could lend money to trustworthy borrowers.
Moreover, CRED app allows consumers to meet multiple credit card repayments on time and earn points to spend on exclusive offers in return. In April 2021, the company achieved unicorn status with a valuation of $2.2 billion. Most incredibly, CRED achieved that in just over 2 years, making the company one of the fastest startups of all time to achieve a unicorn status. This feat is obviously a sign of CRED’s amazing business model which we shall explore in details here.
CRED’s growth and popularity has seen it control 22% of all credit card transactions in India. And it has actually added various other features in recent years such as P2P lending, eCommerce, and the ability to pay other recurring household expenses such as rent and utilities.
What Exactly Does Cred Do?
CRED and its business model provides the ability to reduce the pressure of handling multiple credit cards and to help pay credit card payments on a timely basis. CRED users earn points that can be used towards prompt purchases through the CRED application.
The idea behind CRED is to create a gated ecosystem of high trust credible individuals and eventually build ways for them to link and connect with one another. It is a credit-based ecosystem that provides a safe space for individual lenders and financial institutions to lend money to trustworthy individuals.
It uses the creditworthiness of individuals in the form of their credit scores as a measure to filter the community. Then to retain customers, it rewards them in the form of CRED coins if they make timely payments through the platform.
In simple terms, CRED provides a basic incentive to make prompt bill payments. To make offers more attractive to the users, CRED partners with various businesses. In turn, businesses achieve exposure to buyers from all walks of life.
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Cred Business Model: How it Works
The CRED app records every little detail of a card payment process. This includes spending trends, due date notifications, and other card use data. In addition, users of CRED are entitled to a wide range of benefits, including discounts on products from companies including Diesel and Cure, Fit, Myntra, Olive Bar & Kitchen, and many others, as well as exposure to activities, events, gift vouchers, and improvements.
CRED rewards users for paying bills through the app. CRED partners with businesses to provide the offers. As a result, the businesses gain exposure and traction on a platform where people are already spending. As a result, CRED gets more offers to display on their application. Therefore, visitors have more reasons to join and pay their bills through the app.
There are 3 constituent parts that make up the CRED business model. They are:
- Customers who pay credit card bills
- The CRED app
- And the Businesses who provide offers on the app
Many people pay their credit cards using payment apps or by directly logging into their bank accounts. By using the CRED app, they can perform the same function of paying their credit card bills more beneficially. As more people use CRED to earn benefits, they share those benefits more widely. In fact the CRED app currently boasts 6 million users.
The app allows users to sign up and see all the available offers on paying their credit card bills. As you continue to pay bills, you accumulate CRED coins which you can redeem for the rewards. However, in order to access CRED programs, a credit score of more than 750 must be obtained.
Businesses that Provide Offers on the App
Bringing businesses on board and forming tie-ups with them is imperative for CRED. The CRED app gives small and large businesses alike visibility as buyers of all types use it.
Once the user downloads the app and enters their mobile number, the app runs a quick check on all the cards connected to the registered phone number (no matter how many they are) till the account gets configured. If the credit score is greater than 750, the person is allowed to use the app. If not, he is sent to the waiting list. After receiving access, CRED apps will have access to the mail identification for reading and scanning credit card receipts like due dates and service statements.
CRED Business Model: Key Activities
The key activities that CRED provides its users are CREDIT management, CRED Stash, CRED Mint, RentPay, CRED Store and CRED travel.
1. CREDIT Payments
CRED provides a unified payments interface to the users and enables them to pay their credit card and other bills through the app and receive rewards in the form of CRED coins if they do so on time. They can then use these vouchers and discounts to avail offers on products of partnering companies. It analyses user expenses and sends reminders for timely payments.
2. CRED Stash
CRED Stash is an instant credit line offered by CRED to provide its customers credit with greater ease at an interest rate equivalent to about one-third of the usual charges of using a credit card. It has a credit limit of Rs 5,00,000 ($6,000). With CRED Stash the long and tedious verification and application processes typically associated with loans is eliminated. The process therefore becomes smooth and convenient for the users. The make these loans possible, CRED has partnered with various banks, like the IDFC bank.
CRED’s RentPay feature allows users to pay their recurring household expenses and rent payments through the app. It gives users reminders to pay the bills timely, and making payments through the app eventually leads to rewards which they can avail on the purchase of other products.
4. CRED Mint
CRED launched its peer to peer lending product, CRED mint, in partnership with Liquiloans, an RBI registered P2P non-banking financial corporation(NBFC). It enables its users to lend their money and earn interest rates of up to 9 percent per annum, which is way higher than savings accounts and other traditional forms of deposits. Lenders can invest between RS1,00,000 ($12,000) and RS10,00,000 ($120,000), and earn returns for the period invested.
The investments made in CRED Mint are to be lent out through CRED Cash, a lending product for high trust individuals. And so far, over Rs 2415 crore (about $603,750,000) have been disbursed through regulated partners.
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5. CRED Store
CRED has partnered with various companies in multiple domains of health, travel, e-commerce and so on to allow users to spend the CRED coins they earn and avail offers and discounts while purchasing these products and services through the platform.
It has partnered with over 2,000 brands that offer CRED exclusive prices to the customers that they can easily access through the CRED store. This also helps those companies enhance their visibility and boost their sales through their presence on the app.
6. CRED Travel
Even for those that travel often CRED comes very handy.
CRED Travel lets its users purchase flight tickets, book hotels, and manage their culinary expenses through the app. As usual, by doing this they get rewarded with CRED coin. They can use the coins to purchase different other products from the CRED store.
Benefits of Using Cred App
Cred business models still restricts it to a members-only service. You receive Cred coins as payment for paying credit card payments through Cred. In addition, users may use these coins to make discounted purchases of goods through the app.
You are rewarded with cash back if you use the cred app to make a payment on your credit card. You can immediately utilize this cashback when it is added to your account.
3. Analysis of Payment
When using a credit card, we frequently overspend mindlessly. Cred organizes your spending by making it simple for you to decide where to spend less. All this makes it simpler to comprehend your credit card statements.
4. Simplifies Statement
Cred has a function called CRED protection. A copy of your financial report is provided by Cred Protection, and it emails it to you. These sentences are all password-protected.
5. Automatic Payment
It might be a nuisance to pay the bills on many credit cards. So you may use Cred’s auto repayment option to pay your debts. This process makes use of a form of payment that has been connected.
6. Credit Rating
You often need to utilize another app to figure out your credit score. For example, credit score reports may be obtained using Cred coins. Additionally, Cred provides advice on how to raise your credit score.
7. CRED Offers
Most of the time, we are unaware of the promotions on our payment gateway. Cred will display all available discounts to help you save the most money.
Cred Business Model: The Value Proposition
Famous for its excellent user experience, CRED’s business model stands out by providing the following value to its customers:
- It is an all in one application for paying credit dues, rent and other bills in just five taps. It reduces the hassle of handling multiple credit cards by making the process tremendously simplified, easy and convenient.
- It provides users with an instant credit line and facilitates P2P lending at an interest rate of 9% to lenders, which is way more than what savings accounts and deposits usually offer.
- It records loan caps, analyses hidden costs and overall expenses of the users and tracks due dates and sends them timely reminders to make payments.
- If users make timely payments, it rewards them with CRED coins which they can redeem on the platform ‘Discover’ to avail discounts on different products offered by CRED partners.
- Users can also calculate their credit scores for free and use CRED’s help to maintain a good credit profile and make good financial decisions.
Most importantly, CRED is a niche community of high-trust creditworthy individuals. It works along the lines of the velvet rope effect, where people ‘pay together and can play together’. This creates a social network with a tremendous scope of connecting people with a realm of other possibilities!
Cred Business Model: How it Makes Money
With the powerful services on offer, CRED business model has an enormous potential of generating revenues. Some sources of revenue that are either currently in use are:
1. Affiliate Income
CRED partners and ties up with different businesses who offer their products to the users on the ‘Discover’ platform. This provides CRED users with a greater variety to pick from while redeeming their CRED coins. On the other hand, businesses gain from visibility and draw user attention. Thus, every time a user picks an offer from the app, the business pays an affiliate fee to CRED for sending the business to them.
2. Revenue From Advertisements
CRED’s target audience is the 1% cream population. And having data about their purchases and spending patterns helps it optimize advertisements to encourage more spending through the platform. By so doing CRED earns commissions on sales of those products.
3. Transaction Fees
CRED also charges a processing fee of around 1 to 1.5% on transactions made through the platform.
4. Revenue From Loans
The introduction of P2P lending has led to lenders earning interest rates of around 9 percent and loans being disbursed at interest rates between 10 to 12%. Moreover, CRED also lends customers loans through an instant credit line known as CRED Stash. From this CRED earns interest rates lesser than the charges of using usual credit cards. These are thus good sources of revenue for them.
5. Revenue from Listing Fees
Another source of revenue for CRED is money from listing fees. Businesses actually pay to display their products and offers on its app.
When it comes to balancing your credit cards, Cred has become one of the go-to apps. It has already attracted about 7.5 million wealthy clients with a track history of satisfaction.
CRED business model is naturally attractive, yet the company still has a very innovative and creative way to market itself further. For instance, it delivers cakes to its users’ offices. By so doing, the other people get to know about it and it creates a buzz effect. This helps the company initiate a viral loop, generate more customers, and create a ‘brag-worthy proposition’.
As customers continue to pay their bills and use the platform, the company will have a lot of their financial data, which they can monetize further in the future. Even if they don’t sell these data to some other financial institution or bank for privacy reasons, they can use the data to enhance and personalize users’ experience of the app. And you know what this means to advertisers.
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