THE CRED SPIEL

Personal finance is one of the hottest issues these days, thanks to increasing growth potential. Many people in India are concerned about their financial well-being, making it tough to sustain a personal finance-based firm. However, a few Indian financial businesses are thriving, with some even making it onto the unicorn list. CRED is one of them. Founded by Mr. Kunal Shah, and backed by Sequoia Capital with $30 Million, this credit card users’ app has been valued at Rs. 1,60,00,00,00,000; thus, making it one of the biggest startups. However, its crazy valuation, hazy model and zero profits inflow till now, has triggered a debate on social media to figure out if it’s worth and user friendly. What aspects of the business have earned investors' and users' trust? Should it be trusted in the long run, despite the lack of profit so far? Let's take a look at the answers to each of these questions one at a time.

Mr. Kunal Shah, who is also the creator of Freecharge, created CRED, a Bengaluru-based firm, in November 2018. It's a strategy that makes managing several credit cards simple and compensates consumers for paying their bills on time. The investors’ trust in Shah and his vision helped this model to raise $30 Million from Sequoia Capital in November 2018, and in July 2019, it raised $120 Million at a valuation of $450 Million, followed by $80 Million funding by DST Global at a valuation of $800 Million. The firm is laser-focused on its target market. In India, there are over 50 million credit card holders, with about 30 million of them being active. CRED has been able to capture 15% of this market in just a few years, and 90% of those that return are satisfied customers.

CRED, a newcomer to the digital payment sector, offers a one-of-a-kind business concept. Although they have yet to make a profit, their development has been remarkable. A firm will lose money at first and then reach a break-even point, eventually leading to profit inflow. According to Shah, this is a master method that has been used by large startups such as Facebook, Amazon, and Jio. CRED intends to grow its user base by offering profitable discounts and bargains, as well as having a user-friendly app layout. All a user has to do is join by providing their contact information, consent to receive SMS and emails, and their date of birth.

Once you've joined, you'll have access to a slew of advantages. CRED recognises credit card consumers' frustrations with hidden fees, late fees, and additional interest. As a result, it sends out frequent reminders to members to pay their dues. The lucrative offers it delivers are next in line. Users are rewarded with an equal number of CRED coins for each payment. A member, for example, receives 1,000 CRED coins for paying off a Rs.1,000 debt. These coins can be used for a variety of promotions available within the app. There are deals and discounts from Myntra, Bookmyshow, LEVI'S, GAP, and others, as well as cashback.

It syncs customers' emails with their bank accounts, analyses bank statements, and uses them in two ways. It first alerts you to any tax deductions, additional fees, or a transaction's outstanding amount. Second, the data is used to assess the members' financial behaviour. The users' data is not shared with any other parties, according to CRED's privacy policy. The firm uses this financial behaviour research to deliver clients relevant offers. Last year, during the shutdown, it added to its capabilities by launching a housing rent payment service and loans, which saw rapid development.

Currently, the company's sole sources of revenue are a commission from the advertisements it shows, and it plans to charge for housing rent payment services in the future, but it may be expanded further. For instance, for now, CRED gives Rs 5,00,000 loan to its members (a tie-up with IDFC bank) without background check as the credit score of the members is already good enough. This also extends its userbase. If CRED can reach over 70% of the target market in the next few years, it will be able to open its full-fledged bank branch. It may also charge banks interest for credit card payments and loans because it will have the majority of the reliable consumers. It can also assist its members with their income tax returns. The company's next action will have to be awaited.

So, we've lauded the app across the scene, but isn't it too good to be true? It is, without a doubt. The app may have sponsored the most anticipated league of the year, the IPL, or delivered us the most appealing and amusing ads, or offered a plethora of benefits, but it also has flaws. Because of its technological flaws, a few users have rated the app as "not so good." They claim that the transaction takes a long time to complete or that the offers are invalid. However, the firm claims to have resolved its transactional problem. Also, if the offers aren't to the customers' liking, it's best not to claim them; instead, use the 'KILL THE BILL' option, which allows consumers to get payback for their cred coins. Overall, the software is simple to use and makes handling several credit cards easier. It also avoids any technical financial jargon, which might create the impression that money is complicated when it isn't. This is as strange as believing Rahul Dravid suffers from anger issues. It's safe because it uses 256-bit encryption and doesn't allow for any security flaws. Although a small number of users had a negative experience, the app is worth trying. CRED is another app that deserves a go, just as we gave Paytm or Phonepe a chance.


REFERENCES –

I. Freecharge is one of India's leading payments apps. Consumers can use it for making postpaid, prepaid, metro recharge, DTH and other utility payments across the country. It was founded by Kunal Shah and was later sold to Snapdeal, and a further sale to Axis bank.

II. Experian and CRISIL are two of the credit rating agencies. A credit rating agency (CRA) evaluates and assesses an individual's or a company's creditworthiness. These agencies consider a debtor's income and credit lines to analyse the debtor's ability to repay the debt or any credit risk associated.


Sources -

https://www.business-standard.com/article/companies/kunal-shah-s-cred-start-up-aims-for-revenue-targets-credit-card-users-120081000423_1.html

https://www.livemint.com/companies/start-ups/cred-enters-unicorn-club-at-2-2-bn-valuation-11617702147518.html

https://www.moneycontrol.com/news/business/personal-finance/the-pros-and-cons-of-paying-credit-card-bills-through-third-party-mobile-apps-5897711.html

https://www.afinoz.com/credit-card/cred-app

https://www.cnbctv18.com/startup/cred-revenue-valuation-business-model-8244661.htm

https://economictimes.indiatimes.com/magazines/panache/cred-review-makes-credit-card-bill-payments-easier-rewards-for-timely-transaction/articleshow/66894555.cms?from=mdr