5 Reasons Why Cred Has the Potential to Be an Integral Part of Financial Management

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At times of fast pace of growing income and digitalization, especially in India, the country that is going through a drastic transformation from a lower-middle income to an upper-middle income country because of the nationwide footprints of IT industry and e-commerce, millennials are compelled to make payments through credit cards. Increasing financial literacy and remote working culture among people are also responsible for rising credit card payments as gone are the days when people were scared of the name “Credit Card” only and used to believe only in cash payments. But still, today, there are only three credit card users from every hundred people in India.

After seeing huge response towards unified payments interface (UPI) and mobile wallets, Freecharge founder Kunal Shah and team realise that credit card holds higher penetration opportunity in India. And therefore in 2018, Kunal launched his second venture Cred backed by Sequoia capital on which users can earn rewards for making credit card payments. Cred is designed in such a way that it can manage multiple credit cards of a user and helps him/her to make hasslefree timely payments of credit card bills so that user can redeem the points with rewards. But to gain the access to the program, individual should maintain the credit score above the minimum threshold.

Currently, Cred is not making any profit but the primary aim of the start-up is to expand its user base to collect more data as it accumulates a lot of information like credit card number ,brand and date relating to monthly spends for keep checking on your spending patterns, credit score and related information. So the first possible source of revenue for Cred could be data monetisation. For collected information, banks and financial institutions could pay a significant amount of money. More than that, Cred launched lending products during the lockdown in april which are ‘rent pay’, ‘credit line’ and ‘discover’. Rent pay is nothing but it helps users to pay monthly rent payments and household expenses through credit cards,

Talking about credit line ,it offers around one-third of current interest rates in the market ,in order to make more credit card usage and achieve gains from the banks.

the last is discover which is used to discover brands where users can avail discounts by spending their cred points.

Cred is looking to open the doors for revenue by charging for the ‘rent pay’ service on the basis of credit line they are offering of the respective banks and will also charge the brands for running promotions on ‘discover’ platform. Since April 2020, around 120 brands have already been listed. While there is no counterpart of cred in India, its worth to say that the amount they spent on building the platform will unfold as the return of sizeable revenue in several years to come.

Before lockdown, the company was operational only for five months in FY19, its revenue was nil in FY19 and applied cost was Rs 64 crore. Seems like Cred is moving on the footprints of Facebook regarding the company’s vision of monetisation, first focus on expanding userbase and distribution and then upselling.

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