CRED: The Real Deal?

“It's like saying Rahul Dravid has anger issues”. The camera pans over to a usually reserved man. He fumes and smashes the windows of cars beside him on a crowded urban street. The CRED ad, a snarky 23-second clip, generated considerable hype on social media. But what is the story behind the man who made the company itself?

Kunal Shah, an MBA dropout from Mumbai’s NMIMS, the founder of CRED does not own a car. He chooses to drive an innocuous Vespa instead. His largest splurge has been a home in South Bombay for his family. An entrepreneur by nature, he has spent his life in the pursuit of the answers to two questions. How do you make money? Next, how do you raise the per-capita income of our country? Having invested in over seventy, mostly Indian, startups his answers seem to be clear. Invest in what can provide value to this country’s people in a tangible manner. You're on your way to the golden ticket, Charlie.

The year is 2010. Shah has shut down his startup PaisaBack to set up FreeCharge in August. He had noticed that mobile users tended to go to paan shops to recharge their internet and scratch cards for rewards. The entire process seemed stupid to him. If you already have data on your phone, why is it necessary to go to a specific place? The company was a sure success since it offered a viable alternative to an old, tedious way of doing things. In 2015, Shah sold FreeCharge to the e-commerce marketplace Snapdeal for $400 million.

From the funds gained, two years later in Bangalore in 2017, Shah founded the fintech startup CRED. It is a members-only credit card management app. As of 2021 CRED, valued at $2.2 billion, is one of Asia’s top ‘Unicorn’ startups. CRED offers a range of other services that include paying rent and short term credit lines. How does the app work? CRED incentivizes its users to make their credit card payments on time. It combines credit payment with a social rewards system. For every payment made, users earn an equal number of CRED coins. These may be used to redeem rewards with CRED’s partners, such as Ixigo and FreshMenu, who want to promote their products on the app. Users can also burn through the coins in one go to get a cashback which is credited to their credit cards. CRED’s target audience is a small percentage of people, namely affluent urban Indians who can afford to maintain a high credit score. Currently, the app has around 59 lakh users and 4 lakh people on its waiting list. Those with credit scores less than 750 are working towards improving them to get in. CRED’s salient feature is its exclusivity factor.

Allowing only a certain class into its user base is a deliberate move.Shah has made clear his distaste for foreign companies that come into India looking for the next 100 million users. To him the criteria used to measure the success of non-Indian apps are inapplicable. He has pointed out that a very thin sliver of the Indian population has enough discretionary income to spend on non-essential expenses. Parameters such as Daily Active Users[DAUs] and Monthly Active Users[MAUs] produce attractive numbers. But, if the Average Revenue Per User[ARPU] is not taken into account, these numbers are empty. Youtube has 265 million active users in India, but it's ARPU is two dollars which is not enough to cover streaming costs. Mistranslating foreign precepts and applying them, without context to your ventures is the same as digging your own grave. Making sustainable profit involves understanding the economic position of the different strata of society in your own country. Such perceptiveness is why CRED currently controls about 20 per cent of all credit card transactions in our country.