Fin-tech startups are changing the way the Indian economy works, and when it comes to Fin-tech, it is hard not to talk about Cred. Be it the unconventional ad campaigns or the billion-dollar valuation, Cred has undoubtedly disrupted the Indian startup ecosystem.

Rewarding customers for paying their credit card bills on time, Cred is a members-only credit card payment solution. Offering features like auto repayment and smart statements, Cred has simplified the life of every credit card user.

That said, looking at what Cred does, everyone has one question in their mind; how is the company going to make money? The unicorn startup spent a mind-boggling 727 rupees to earn a rupee in 2020.

So, how is the company going to come out of this massive cash burn? In this article, we will try to analyse Creds’ business model and understand how the budding startup plans to make itself profitable.

Also read: What is CRED? Is it safe?

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A break down of CREDs’ business model

Before getting into Creds’ business model, it is quintessential to understand the market it wants to penetrate and the people who use the app.

Market

The Indian credit card market is changing rapidly, and the industry is estimated to grow at a CAGR of 25 per cent from 2020-2025. In addition to this, the market penetration for credit cards in the country is low. Only 3 out of 100 people own a credit card compared to 32 in the USA.

Looking at the data given above, one can see that the Indian credit card industry is expected to grow exponentially, and Cred wants to capture this growing market.

Customer base

Cred is a members-only payment solution, and people with a credit score of 750 or higher are eligible to use the app. Having such users as customers are what makes Cred unique.

By filtering the people who can use the app, Cred has diligently created a community of people who diligently pay their credit card bills.

Strategy

To retain its customer base of diligent credit card users, Cred rewards them with cred coins. Users can use these coins to buy products on the Cred app at a discounted price.

Also read: Apple Pay vs Google Pay vs Samsung Pay: 3 key talking points

How does CRED make money?

Till now, Cred has a total of 6 million users. These users are members of the Credit club and have access to a premium discounted marketplace. Now, all the company has to do is understand what these people like and sell similar products.

In addition to leveraging its unique user base, Cred has created the following revenue streams:

• Listing charge: Cred offers a unique marketplace to businesses. With a premium user base in its pockets, Cred can sell luxurious products effortlessly. To gain visibility in front of such a distinctive user base, businesses must pay a listing charge to Cred.
• Cred pay: Cred collaborated with Razerpay and Visa to enable users to make payments on partner websites using Cred coins. Using Cred pay as a payment method, members can get discounts on products using their Cred coins. By doing this, Cred will get a part of the transaction discount rate which is charged for processing the payment on the merchant website.
• Cred rentpay: With Cred rentpay, users can pay rent using their credit cards. That said, a transaction fee of 1-1.75% is taken for processing these payments.
• Cred stash: With Cred stash, Cred provides its users with a personal credit line. This enables users to get a loan without any collateral. The amount of money that users can loan from Cred varies, and an interest of about 11-14 per cent needs to be paid on the loan. In addition to this, a processing fee of 1-2 per cent is also deducted for such payments.

Although Cred is not cash flow positive yet, it has created a premium marketplace for its users. In addition to this, Cred has financial data of over 6 million people, and it understands the way people spend their money. Using this data, Cred can send personalised recommendations to users and drive sales on its platform.

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