Decoding CRED: A Masterclass in Fintech Innovation and Customer-Centric Success #Issue04

From viral loops to financial insights - unveiling the secrets behind CRED's trailblazing journey in the world of fintech

CRED, a dynamic Indian fintech company, emerged on the scene in 2018, founded by the visionary Kunal Shah. The driving force behind CRED was Shah's commitment to resolving trust issues prevalent in the Indian financial landscape. His aspiration was to build an ecosystem that fosters connections among credible individuals while providing a platform for financial institutions to lend to trustworthy borrowers.

The heart of CRED lies in its user-friendly app, designed to help consumers effortlessly manage multiple credit card repayments. The unique twist? Users are rewarded with valuable points for their responsible financial behavior, which can then be redeemed for a range of exclusive offers.

CRED's journey to success reached a remarkable milestone in April 2021 when the company achieved unicorn status with an impressive valuation of $2.2 billion, marking it as one of the fastest startups to do so. Today, CRED boasts control over a substantial 22% of all credit card transactions in India with more than 12 million users and a valuation of $6.4 billion.

As the company has evolved, it has introduced diverse features to cater to the evolving needs of its users. Beyond credit card management, CRED has expanded into peer-to-peer lending, ventured into e-commerce, and streamlined the process of paying other recurring household expenses like rent and utilities.

In essence, CRED has become more than just a financial platform; it's a comprehensive solution that enhances the overall financial experience for users, offering a one-stop-shop for various financial needs. With its commitment to trust, innovation, and user satisfaction, CRED continues to redefine the landscape of fintech in India.

CRED’s Value Proposition

CRED brings a host of enticing benefits to its users, making it a go-to platform for savvy individuals looking to enhance their financial experience:

1. Rewards for Responsible Spending: By utilizing CRED to pay credit card bills, users unlock a world of rewards and benefits, promoting responsible credit card usage.

2. Easy Credit Score Monitoring: CRED goes beyond the norm by offering a feature that enables users to effortlessly monitor and track their credit scores, empowering them to take control of their financial well-being.

3. Exclusive Lifestyle Enhancements: Users of CRED are treated to a plethora of exclusive offers and discounts from partner brands, adding a touch of luxury to their lifestyle while enjoying significant savings.

4. Effortless Bill Settlement: CRED simplifies the credit card bill payment process, providing users with a hassle-free and streamlined way to settle their bills, saving both time and effort.

5. Building a Financially Responsible Community: Beyond individual benefits, CRED fosters a sense of community among its users, creating a space where responsible financial behavior is not just encouraged but celebrated.

6. Security and Privacy: CRED places a high premium on the security and privacy of its users' financial data, ensuring a trustworthy and secure environment for all transactions.

Apart from its core products and services include: – Credit Card Bill Payment, they offer some other features like:

- CRED Stash: A low-interest line of credit for short-term borrowers, supported by IDFC First Bank in India.

- CRED Store: An avenue for customers to utilize their CRED coins across 2000+ brands, featuring names like Tata, Puma, and Samsung.

- CRED RentPay: Simplifying rent payments, allowing customers to transfer rent directly to the landlord's bank account using a credit card.

- CRED Mint: A P2P lending facility connecting lenders with surplus funds to borrowers facing short-term financial needs.

Business Model of CRED

The business model of CRED is based on a 3-pillar structure:

Customers:

For individuals seeking a smarter way to handle bill payments, CRED offers a user-friendly interface that beats the traditional bank account route. By consolidating various bills into a single, intuitive platform, users find a more rewarding experience. To join this exclusive club, customers need a credit score of at least 750, ensuring a higher likelihood of timely bill payments. The app's unique approach even rewards users with CRED coins based on the total bill amount settled.

The App:

At the heart of CRED's seamless bill payment experience is its highly acclaimed app. With an elegant UI and UX design, it has earned a remarkable 4.7 rating in the Google Play Store. Beyond its aesthetic appeal, the app serves as the hub where bills are effortlessly settled, and users earn and redeem CRED coins. Notably, it stands out by awarding coins based on the total bill amount, adding an extra layer of benefits for users.

Businesses:

CRED isn't just about empowering consumers; it's a platform where businesses find opportunities too. By offering special deals, businesses increase their visibility among their target audiences. In return, these businesses partner with CRED, compensating the platform to showcase their exclusive offers within the app. It's a win-win, where users get enticing deals, and businesses gain exposure and engagement.

How CRED Generates Revenue: Unveiling the Money-Making Magic

CRED's revenue streams are as diverse as the benefits it offers to users. Here's a breakdown in simpler terms:

1. Listing Fees:

Much like how e-commerce giants charge merchants to showcase their products, CRED collects listing fees from partner brands featured within the app. These fees contribute to the vibrant array of offerings available to users.

2. Commissions:

When users redeem their hard-earned points for exclusive offers, CRED takes a small commission from the businesses providing those offers. Additionally, for every successful loan facilitated through Cred Stash, the company earns a commission. In the realm of making rent payments hassle-free, CRED charges around 1 to 1.5% of the total transaction amount through its RentPay functionality.

3. User Data:

As users navigate the platform, paying bills, and exploring various features, CRED gathers valuable insights. The company then monetizes this data by selling it to financial institutions. These institutions leverage the data to develop improved credit card and loan products, creating a win-win scenario for everyone.

CRED's revenue model is intricately woven into the fabric of its user-friendly services, creating a symbiotic relationship where users enjoy benefits, and CRED sustains itself through diverse revenue streams.

Financials

According to the company's press release, CRED’s operating revenue grew 3.5X to Rs 1,400.6 crore in FY23 from Rs 393.5 crore in FY22. The firm also made Rs 84.4 crore from non-operating activities or finance income. In the end, Cred’s total revenue stood at Rs 1,485 crore.

Regarding cost, employee benefits accounted for 27.8% of the overall expenditure which spiked 2.5X to Rs 789 crore in FY23 from Rs 308 crore in FY22. Importantly, this includes Rs 300 crore as ESOP cost (non-cash).

Its payment processing cost, marketing and business promotion, information technology, legal, and professional fees pushed its total expenditure by 66.4% to Rs 2,832 crore in FY23 from Rs 1,702 crore in FY22. Resulted a modest 5.3% increase in its losses to Rs 1,347 crore in FY23 from Rs 1,279.5 crore in FY22. Its ROCE and EBITDA margins stood at -31.95% and -86.42% respectively. 

The Bottom Line

CRED isn't just another financial app; it's a master of creative marketing and data utilization. Here's how they do it, simplified:

For instance, look at the famous viral CRED ad “Indranagar ka Gunda” featuring Rahul Dravid during IPL; it's a smart marketing move. By creating buzz through moment marketing, CRED initiates a viral loop. People talk about it, and curiosity spreads, attracting more users. It's like creating a 'brag-worthy proposition' that gets everyone talking.

As users engage with the app, paying bills and exploring its features, CRED gathers a treasure trove of financial data. While privacy is a priority, there's potential to monetize this data responsibly. Even if they don't sell it to other institutions, they can use it to enhance and personalize the app experience for users. It's about making the app more intuitive and tailored to individual preferences.

CRED believes in building a gated community first, focusing on the startup's core values before diving into profit-making endeavors. It's about fostering a sense of belonging and trust among users, creating a space where responsible financial behavior is encouraged and celebrated.

In short, CRED's approach isn't just about making money; it's about creating an experience that users love and trust. From innovative marketing tactics to responsible data usage, CRED is reshaping the fintech landscape with its customer-centric philosophy.

Come on! Tell me what you think of CRED’s business model by replying to this email. Also, share your favourite campaign of CRED.