In this post, you will be reading about CRED’s business model and how CRED generates revenue.
Credit cards have become an essential life tool. It is a small plastic card with which you can make purchases you don’t have the cash for. With the rise of e-commerce on the earth the use of credit cards is also becoming famous every day.
With the rise in the number of credit cards, the need for maintaining them has also increased. Taking this as an opportunity, CRED took a dive into the arena. CRED is a platform where the consumers receive cred coins every time they pay their bills through CRED. It helps the users win exclusive rewards that can be used towards prompt purchases through the CRED application.
CRED is the latest entrant to the coveted $1 billion valuation club (Unicorn Club), following the closure of its Series D funding round at $215 million. CRED’s valuation almost tripled from $800 million to $2.2 billion.
But have you wondered how does CRED make money when all it is doing is rewarding us coins and sending timely reminders. Here is how CRED app makes money.
CRED business model – How does CRED make money?
Any aspiring entrepreneur wants to know what is the CRED business model. The 3 pillars of the CRED business model are:
1. Customers information:
CRED allows users to share certain data such as credit card numbers, access to emails to track users’ expenses and due amounts, credit score, and how they invest their money.
Financial institutions always want such viable customers information for their credit cards, loans, and other financial products.
As CRED users are frequent consumers and highly relevant for financial institutions – young, tech-savvy, and frequent buyers of products, banks, and credit card companies pay CRED to get access to the data or advertise their products directly to these customers.
2. Product and offer listing fees:
We know that CRED rewards users for paying bills through the app. And these rewards (cred coins) are used towards prompt purchases through the CRED application. In order to make these deals available, CRED must include companies and create connections with them. CRED makes money by charging businesses a small listing fee to display offers on the app.
3. CRED’s sub-products:
CRED has a varied product span – Rentpay, CRED Stash, Store, Credit Card Payments, and CRED Pay – where it draws its part of the revenue.
1. CRED Pay
It 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.
2. CRED RentPay:
CRED RentPay allows its users to pay recurring household expenses and bills, and monthly rent payments using credit cards. The users need to add the landlord’s bank account or UPI details and instantly transfer the rent from their credit card, directly on the app.
CRED will charge users a transaction fee of 1% – 1.5% depending on the user’s credit card network. The main advantage that lies here is that the app helps users get an interest-free credit period on rent and also lets them earn reward points on their credit cards.
3. CRED Stash:
CRED Stash offers a low-interest instant credit line. This allows members for a pre-approved with an active credit line of up to Rs 5,00,000.
While they can draw down from their available limit and can select the preferred duration to pay back the amount, the bank will charge interest only on the amount withdrawn, at a third of the interest rates charged on credit card usage. This feature, however, depends on the members’ credit scores, credit card limits, and previous card repayment.
- Cred is a Bangalore-based startup started in 2018. Kunal Shah, who’s also the founder of Freecharge, founded CRED.
- CRED is the first technology in India to pay the user’s credit card bills on time.
- In only over 24 months of operations, CRED already processes about $1B in monthly credit card payments in India (12.5% of the total credit card payments).
In conclusion, CRED has the potential to build a product that makes the credit card checkout process as seamless & intuitive as using Google Pay or PhonePe since they already have it within the app to pay for products & services.
Slowly, CRED will become so deeply integrated into your life while making purchases and CRED is able to extract a lot more value from their members while simplifying their lives and making it easier to do & manage all their spending.
Frequently asked questions (FQAs) about CRED
1. Is cred safe?
Yes. As it is approved by RBI, the CRED app is completely secure and safe to use.
2. Is CRED free?
CRED is a completely free app for all credit card users to pay bills from. In return for paying bills, you receive cashback and rewards from different businesses.
3. Is CRED profitable?
According to entrackr, CRED has recorded zero revenue in financial year 2019. The only income was the INR 3.03 crore generate from interest on their deposits. The company’s overall cash burn stood at INR 64 crore.
4. How does CRED make money?
CRED makes money by charging a fee from businesses to list products and offers on the CRED application. Also they expect to earn money from a credit-line business model in the future
5. What is the tagline of CRED?
Tagline of CRED is #killthebill
6. Is CRED approved by Reserve Bank of India (RBI)?
Yes. When you go through the registration process on the app, you need to complete a set of KYC and credit related review steps which involve the RBI. Without their involvement, the app cannot function to check your credit scores and access your personal data.
Recently, Rahul Dravid’s appearance in an advertisement for CRED went viral breaking the internet. Watch the video below.
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