How Cred makes money

Cred

This November, Cred turns six and the company plans to turn profitable before a potential listing in the public markets.

So, how does Cred make money?

The beginning

Let’s rewind. Cred started as an invite-only app to pay credit card bills. The app credited Cred coins for bills paid on the platform, which could be redeemed by customers for discounted products and services offline as well as online.

There are an estimated 5 crore unique credit card users in the country and Cred says that it is targeting the most affluent customers in the country. Cred has around 1.3 crore users and 1.1 crore monthly transacting users (MTU).

As of today, the company monetises only a third of its MTU, which indicates that there is a lot of headroom to grow the revenue.

Cred relies on five major engines to make money, with a few more in the pipeline.

Let’s dive in.

Act 1: Bill Payments

Credit card customers were using Cred to pay credit card bills, which generates a small commission from banks.

In April 2022, the company launched utility bill payments such as electricity, mobile postpaid, DTH among others.

Cred launched UPI payments in 2022 and has since offered a lot of cashbacks to acquire customers and market share in the mobile-based real-time payments platform. UPI apps earn a small fee from every transaction that happens through their app.

Cred also provides plug-ins for third-party websites and apps at their payment gateway and earns a small payment fee.

But payments alone are not enough to bring in revenues.

Act 2: Lending

The majority of Cred's revenue has been driven by lending, the holy grail for fintechs who want to make money in India.

Cred started lending in 2020, offering a credit line of up to Rs 5 lakh without any documentation. By the middle of 2022, the company had a loan book of around Rs 6,000 crore.

The current loan book stands at around Rs 15,000 crore, according to a source. Moneycontrol has written to Cred on the size of loan book but has not got a response at the time of publishing the story.

Even as RBI has been announcing measures that would tighten the unsecured lending in the country, Cred says that it has seen more interest among its partner financial organisations. The company attributes this to its client base of affluent customers as the stress is seen mostly among subprime and small-ticket loans. Cred’s loan sizes are mostly above Rs 1 lakh.

The fintech also has Cred Mint, a peer-to-peer lending product as well as Cred Flash, a buy now pay later product. The former has been paused due to regulatory restrictions.

Act 3: Insurance

Last year, the company launched Cred Garage, a vehicle management platform. It facilitates motor insurance payment and renewal on the platform apart from settling any fines for traffic violations. It also offers cashbacks on fuel bills paid through Cred.

At the end of FY24, Cred had 42 lakh vehicles managed on the platform, which had risen to more than 60 lakh by the end of September. Motor insurance is among the largest non-insurance segments in the country.

Most Cred customers are likely to have more than one vehicle and if the company can convince its customers to renew the premium on its platform, it can be quite big.

Among fintechs, market leader in UPI payments, PhonePe, and insurance aggregator PB Fintech are currently much bigger than Cred in this category.

Act 4: Shopping and Travel

Cred offers curated products from direct-to-consumer brands and travel packages on its platform. The number of products available is mostly limited and all the brands are not necessarily premium.

The items offered on the platform are often on sale at huge discounts. For brands, it serves to advertise new launches to a select few customers to get feedback before pushing through the products on larger ecommerce sites like Amazon or Flipkart.

Some smaller brands also use Cred as a platform for better visibility. For instance, audio products by Hammer or Portronics will not have the same visibility on Amazon as compared to Cred.

This also applies to travel packages as well. Some of the hotels and travel companies offer curated packages but at a discount, compared to what they typically offer.

Act 5: Wealth and investment

A few months back, Cred acquired Kuvera, a wealth management and investment platform.

Cred is expected to offer investment products like direct mutual funds, FDs, SIPs, and digital gold to its user base besides financial planning tools.

Kuvera, which houses an Investment Advisor (IA) license, also offers personal goal-planning tools and taxation advice which might get added to the Cred platform.

And more….

Cred is also planning to launch multiple other products, but will tread cautiously and slowly, Shah said adding, “We have been able to demonstrate our ability to cross-sell different products. Customer monetisation in financial services is easier.”

As of now, more than 90 percent of the company’s revenue comes from payments, lending and insurance.

“We will never launch a product that is speculative or promises quick returns. We will never sell high-interest rate loans or products that could be detrimental to our customers' financial health,” Shah said.

With a decent topline and a potential path to profitability, Shah seems to have answered most of his detractors, for now.