CRED is an Indian fintech company founded in 2018 by Kunal Shah, who was motivated to create the platform to solve the trust issues he believed were present in Indian finance. Shah wanted a create an ecosystem where credible individuals could connect and where lenders and other financial institutions could lend Money to trustworthy borrowers. The Cred app allows consumers to meet multiple credit card repayments on time and earn points to spend on exclusive offers in return. In April 2021, the company became one of the fastest startups to achieve unicorn status with a valuation of $2.2 billion.
CRED now controls 22% of all credit card transactions in India, with various other features added in recent years such as P2P lending, eCommerce, and the ability to pay other recurring household expenses such as rent and utilities.
CRED business model
CRED’s business model is based on three key pillars:
- Customers – who pay their credit card and other bills using a single interface that is more intuitive and rewarding than paying through their bank accounts. Customers must have a credit score of at least 750 which increases the likelihood bill payments will be made on time.
- The app – which provides the interface where bills can be settled and CRED coins can be earned and redeemed. The app is renowned for its elegant UI and UX design with a 4.7 rating in the Google Play Store. One unique feature of the app is that it awards coins based on the total amount of the bill that was paid.
- Businesses – who provide customers with offers in exchange for increased visibility among their respective target audiences. Businesses also compensate CRED to display their offers inside the app.
Customer value proposition
The company offers several value propositions to consumers who download the seamless and stylish app. They must first sign-up by providing their details and all the credit cards they wish to manage linked to a cell phone number.
As touched on earlier, there are several useful features within the app in addition to credit card payments. These include:
- CRED Stash – a low-interest line of credit for short-term borrowers that is backed by IDFC First Bank in India.
- CRED Store – where customers can spend their CRED coins on over 2000 brands including Tata, Puma, and Samsung.
- CRED RentPay – where customers can transfer their rent direct to the landlord’s bank account using a credit card.
- CRED Mint – a P2P lending facility that matches lenders with extra funds with borrowers who are short of funds.
How does CRED make money?
CRED makes money in a few primary ways.
Listing fees
The first is listing fees that it collects from partner brands who list their products and services inside the app. This listing fee is not unlike the fee eCommerce sites such as Amazon charge merchants to display their products.
Commissions
Whenever a user redeems their points for such an offer, CRED also collects a commission from the business concerned. The company also takes a small commission for every successful loan that it facilitates as part of the Cred Stash
Furthermore, as part of the CRED RentPay functionality, the company collects around 1 to 1.5% of the total transaction amount.
User data
CRED also collects extensive data on its users as they pay bills and otherwise interact with the platform. The company then sells this information to financial institutions that use it to create better credit card and loan products.
Key takeaways:
- CRED is an Indian fintech company founded in 2018 by Kunal Shah, who created the platform to solve the trust issues he believed were present in Indian consumer finance.
- CRED’s business model is based on the three key pillars of the customer, app, and business. Customers are vetted for creditworthiness during the application process, which increases the likelihood that bills will be paid on time and that coins will be earned to redeem on partner offers.
- CRED makes money via listing fees that it charges businesses in exchange for listing their products and services. It also collects a commission from every loan it facilitates and a separate commission from brands whenever a customer redeems an offer.
List of FinTech Business Models
Acorns
Acorns is a fintech platform providing services related to Robo-investing and micro-investing. The company makes money primarily through three subscription tiers: Lite – ($1/month), which gives users access to Acorns Invest, Personal ($3/month) that includes Invest plus the Later (retirement) and Spend (personal checking account) suite of products, Family ($5/month) with features from both the Lite and Personal plans with the addition of Early.
Affirm
Started as a pay-later solution integrated to merchants’ checkouts, Affirm makes money from merchants’ fees as consumers pick up the pay-later solution. Affirm also makes money through interests earned from the consumer loans, when those are repurchased from the originating bank. In 2020 Affirm made 50% of its revenues from merchants’ fees, about 37% from interests, and the remaining from virtual cards and servicing fees.
Alipay
Alipay is a Chinese mobile and online payment platform created in 2004 by entrepreneur Jack Ma as the payment arm of Taobao, a major Chinese eCommerce site. Alipay, therefore, is the B2C component of Alibaba Group. Alipay makes money via escrows transaction fees, a range of value-added ancillary services, and through its Credit Pay Instalment fees.
Betterment
Betterment is an American financial advisory company founded in 2008 by MBA graduate Jon Stein and lawyer Eli Broverman. Betterment makes money via investment plans, financial advice packages, betterment for advisors, betterment for business, cash reserve, and checking accounts.
Braintree
Venmo is a peer-to-peer payments app enabling users to share and make payments with friends for a variety of services. The service is free, but a 3% fee applies to credit cards. Venmo also launched a debit card in partnership with Mastercard. Venmo got acquired in 2012 by Braintree, and Braintree got acquired in 2013 by PayPal.
Chime
Chime is an American neobank (internet-only bank) company, providing fee-free financial services through its mobile banking app, thus providing personal finance services free of charge while making the majority of its money via interchange fees (paid by merchants when consumers use their debit cards) and ATM fees.
Coinbase
Coinbase is among the most popular platforms for trading and storing crypto-assets, whose mission is “to create an open financial system for the world” by enabling customers to trade cryptocurrencies. Its platform serves both as a search and discovery engine for crypto assets. The company makes money primarily through fees earned for the transactions processed through the platform, custodial services offered, interest, and subscriptions.
Compass
Compass is a licensed American real-estate broker incorporating online real estate technology as a marketing medium. The company makes money via sales commissions (collected whenever a sale is facilitated or tenants are found for a rental property) and bridge loans (a service allowing the seller to purchase a home before the revenue from the sale of their previous home is available).
Dosh
Dosh is a Fintech platform that enables automatic cash backs for consumers. Its business model connects major card providers with online and offline local businesses to develop automatic cash back programs. The company makes money by earning an affiliate commission on each eligible sale from consumers.
E-Trade
E-Trade is a trading platform, allowing investors to trade common and preferred stocks, exchange-traded funds (ETFs), options, bonds, mutual funds, and futures contracts, acquired by Morgan Stanley in 2020 for $13 billion. E-Trade makes money through interest income, order flow, margin interests, options, future and bonds trading, and through other fees and service charges.
Klarna
Klarna is a financial technology company allowing consumers to shop with a temporary Visa card. Thus it then performs a soft credit check and pays the merchant. Klarna makes money by charging merchants. Klarna also earns a percentage of interchange fees as a commission and for interests earned on customers’ accounts.
Lemonade
Lemonade is an insurance tech company using behavioral economics and artificial intelligence to process claims efficiently. The company leverages technology to streamline onboarding customers while also applying a financial model to reduce conflicts of interest with customers (perhaps by donating the variable premiums to charity). The company makes money by selling its core insurance products, and via its tech platform, it tries to enhance its sales.
Monzo
Monzo is an English neobank offering a mobile app and a prepaid debit card for consumers and businesses. It was one of the first app-based banks to enter the UK market, founded by Gary Dolman, Jason Bates, Jonas Huckestein, Paul Rippon, and Tom Blomfield in 2015. All were employees of Starling Bank, a similar neobank challenging the dominance of established financial institutions in England. The company enjoys many revenue streams: business and consumer subscriptions, interchange and overdraft fees, personal loans, and more.
NerdWallet
NerdWallet is an online platform providing tools and tips on all matters related to personal finance. The company gained traction as a simple web application comparing credit cards. NerdWallet makes money via affiliate commissions determined according to the affiliate agreements.
Quadpay
