CRED – Power Player of the Match?

Both Sreevatsa and I have been huge cricket fans throughout our life. If cricket were to be classified as a religion in our country, we were to sign up to pray to our gods surely. This year was dry for cricket until IPL started and most of our conversations in the last two months revolved around discussing the games. There was a lot to discuss; IPL was different this year. Apart from the fact that there was no stadium attendance, and RCB, for the most part of the tournament, was playing good cricket, the business student in us appreciated the fact that all the major tournament sponsors were Indian Start-ups – Dream11, Unacademy, CRED.

Among all the Ad campaigns, the one that stuck our minds the most was CRED’s quirky ‘Not for everyone’ campaign featuring Anil Kapoor, Madhuri Dixit, Govinda, and Alka Yagnik. While the Ad’s call to action was straightforward – Download CRED and win rewards. The question has to be asked, what exactly is CRED, and how does it work?

The Genesis

CRED is the brainchild of Kunal Shah, who also co-founded FreeCharge. Shah is of the most celebrated entrepreneurs in the Indian start-up ecosystem. Apart from his business genius, Kunal is also known for his thoughts on society, economy, wealth, and education (you should check his interviews, podcasts, and talks). Taking a moment to discuss the founder is important in this story.

Kunal gave investors a staggering $400 million (~ 2800 cr) exit on FreeCharge in 2015. FreeCharge was acquired by Snapdeal then and is currently owned by Axis Bank. After FreeCharge, Kunal had a stint with Sequoia Capital as an advisor and as a partner in Y-Combinator. There were also rumors talks of him leading the India team of YC, but an idea was brewing in his mind.

Now here’s a question, what do VCs like more than a founder who gave them a successful exit on their first investment? The answer – The same founder giving them a chance for a second-time exit. CRED raised $30 million (~ 220 Crore) in its seed round. This was when the product hadn’t still gone live. It would not be wrong to say that investors invested in Kunal Shah and not CRED. You get why knowing the founder is important, right?

Trust is expensive

Shah’s premise is simple. India is not a high trust society, and if we can create trust in the system, it would create an ecosystem where business can be built. A little abstract at first, but that’s CRED.

CRED wants to build a gated community of high trustworthy (read creditworthy) customers who can be rewarded for their creditworthiness and provided with benefits.

In one of the early interviews with YourStory, Shah explains why when the world targets the next 500 million people in India to build businesses, he took the alternate path of targeting the top 30 million. Having built FreeCharge, a company for the masses, Shah says that the next 500 million might be the future of the market, but the market readiness is not there. The major business of internet companies still come from the top 40-50 million in India. And hence why CRED is targeted at the top of the pyramid. India has 25-30 million unique credit cards where the market lies.

Currently, CRED allows individuals with a credit score of 750+ to register the platform. Users having a score below that are put on a waitlist and have to up their score to get in. This is what is meant by creating a gated community. It works as an exclusive club.

The Model

After registering credit cards on the application, members are given rewards coins and cashback to pay their credit card bills using CRED. Rewards as a means of customer acquisition are central to both FreeCharge and CRED.

CRED coins are offered equivalent to each rupee of credit card amount payment. Users can claim these coins to avail offers from CRED partnered brands on the platform such as BookMyShow, Noise,, Ixigo, Myntra, Big Basket. Burn 2500 coins to earn a coupon for dinner or burn 3000 coins to get 500 off on a product. The reward program is quite similar to what banks have been doing to incentivize their credit card users.

From a customer retention point of view, a company like CRED has a problem. Paying credit card bills is a low engagement infrequent activity. Most of the users will use the platform once or twice a month. CRED has introduced games like spin the wheel and slot machine where you enter using your points and get a chance to win jackpots. There are also referral leader boards and shopping corner in the application.

Show me the Money

Earlier in the discussion, we mentioned how CRED is targeted at the 25-30 million credit card users of the country. The business is built around the high capacity of these users’ transaction value. While mass internet companies focus on low per customer revenue - high volume overall play, CRED is focused on the high revenue low volume end of the spectrum. Its air of exclusivity and FOMO fuelled early customer acquisition.

Until this financial year, most revenue CRED was making was through fee from its partnered brands for running their deals on its platform. CRED’s attractive customer base helps these brands target their offerings better.

But the business sustainability of such a model has invited due skepticism. For one, how many brands are willing to spend just to get access to a high creditworthy customer base? (most internet companies or brands are focused on mass-market). CRED saw a good initial partnership with various brands, which now is fading. The Ken reports in one of their articles

‘Some brands claimed the initial partnership with CRED was merely a marketing experiment and was never intended to be long-term. Others said that the offers were granted on a “once and done” basis and were only meant to induce trials for new users’.

Brands seemed to be motivated to enter this partnership primarily due to Shah’s social capital and personal brand. It seems that the users were not the only ones in the CRED induced FOMO.

Ever-evolving plans

Shah categorically states that CRED is not a fintech company. It is a lifestyle brand. For starters, the CRED app eludes the premium lifestyle brand ideology that it wants to convey. For the short period that I have used the application, I found it beautifully built and appealing. (Interestingly, in 2019, Kunal Shah, in a social experiment, put out a post for crowdsourcing of ideas for CRED. The post received over 1000 responses on how can the company make the product better)

Not limiting itself to a fintech company also means that CRED could horizontally grow into anything. Ujjwal Trivedi captures this in his blog quite succinctly, ‘Payment/repayment is an entry point. You got to start somewhere. It’s fintech today, ed-tech tomorrow, x-tech someday’.

Come 2020, in the quest to build a revenue stream by monetizing the user base; CRED launched two in-house products – Stash and RentPay. Stash is an instant pre-approved loan facility launched in partnership with IDFC First Bank, and RentPay incentivized users to pay their rent using a credit card (smells like fintech, anyone?).

The timing of these launches, which coincides with COVID, is also understandable. Times like a pandemic made CRED users cut on their discretionary spending, making for the central part of credit card spend. Also, due to lockdown and social distancing measures, most of the brands on the platform were not useful anymore.

The sustainability of these lending products (Stash and RentPay) is also in question. While both these services do make business sense during a pandemic, CRED’s customer base is also the darling of the banks which they treasure. Banks seek out such a customer base to extend credit facilities at nominal rates. In a model where CRED works as an intermediary for loans that originate from the banks, there is so much role that CRED can play.

Horizontal Stack

Historically successful business models have thrived by taking a vertical approach by creating competitive advantages though operating in a niche category and expanding horizontally as they expand and diversify. CRED seems to be focused on building a horizontal stack. While discussing possibilities emerging out of CRED, Kunal Shah mentioned in an interview that their focus primarily in the early part of the operation is to not on revenue but buiding a high trust ecosystem. Opportunities then would emerge in banking areas, classified or even maybe how can the CRED member get VISA quickly.

In my opinion, CRED value unlocking might emerge out of the data that it is able to gather. Although the company doesn’t count itself as a FinTech, I would anticipate it to go into personalized financial product offerings soon. Member-exclusive events, community gatherings, dating site, classified for high-value items all seem likely. If data is gold, then CRED, through getting into the spending pattern of high creditworthy customers, is sitting on 24 Karat.

Final comments

I believe that a business-like CRED couldn’t be built if it wasn’t Kunal Shah, who was running it. Without a solid foreseeable revenue stream (at least to an outsider), CRED is operating on a standard ‘Have Money, Will Spend’ customer acquisition ideology. Now there’s nothing wrong with that, but the kind of funding it has raised at a nascent level without much to show in the bottom line is commendable. And while it has good runaway with the existing funds, I would guess that before the next round of funding is raised, we will see more clarity in the business model.

So, if you ask me what business is CRED in? I am not sure. But I am sure about two things. One, Kunal Shah, is a smart founder and that CRED might pivot with its verticals for sometime before it lands up, making its core product more competitive and valuable.

Second, the company indeed believes that it has become a status symbol, something that I disagree with.


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