Protected by Copyscape #5 Cred case study - Startup business plan

#5 Cred case study


cred case study


Cred case study

CRED is one of the most fascinating

business case studies in the Indian start-up ecosystem.

In just 2 years, CRED went from 0 to hitting a $2B valuation

and became one of the youngest Indian startups

to reach this milestone.

Now, the peculiarity of CRED is that in 2020 alone

CRED incurred a massive loss of ₹360 crores

which is a massive increase of 492% from 2019.

And for every rupee of revenue that CRED generated

they spent ₹727 which is a massive cashburn.

We all have seen the result of massive expenditure into

creative marketing.

*beating noises*

So now the question is, even with such massive losses

how is it that CRED is getting so much funding ?

And what exactly is Kunal Shah’s strategy ?

Well, the beauty of this case study is the that if you only

understand what CRED is doing

you will more or less understand a large chunk of the Indian

startup ecosystem

because most of the giant companies like Jio, Ola, PharmEasy

also operate in a similar fashion.


and the most important factor that is common in all of them

is that

they extensively work on altering the behavioural design of

the society.

And the anticipation of that behavioural design,

is what makes them billion dollar companies.

This golden strategy works out in 4 discrete steps

The first phase is what we call cash burn and here’s where

The company, first identifies a major problem in the


Number two, it designs a system to fix that problem

Number three, it raises a million dollars in funding

and lastly it entices the customers to use the product by

giving out unbelievable offers

which are almost too good to be true.


A very simple example of the same is Jio.

First of all, Jio identified internet accessibility as a

major problem in the Indian society

and then Reliance spent about ₹1.5 lakh crores into building

the infrastructure required for Jio.

And then in 2016 when Jio got launched, they gave out offers

that almost looked impossible.

-free sim cards, free calls and free internet.

And the moment this announcement happened, millions of

people rushed to buy Jio sims.

And Jio did everything in it’s capacity to maximise it’s

number of it’s users

without even bothering about profits.

Which is why, on top of the heavy investment that they made

they further incurred a loss of Rs. 31 crores in 2016.

Just like this, when CRED rolled out in 2018 they identified

3 of the biggest pains of a credit card holder which are;

number one, hidden charges


Number two, late fees due to forgetfulness

and number three is the extra interest.

And they rolled out massive cashbacks and offers to

incentivise the act of on-time payment.

And these offers were as amazing as free flight tickets

extremely lucrative discounts and ₹1000 cashbacks also

Fast foward to 2021, CRED today, has over 30 lakh users

and today, CRED is already processing 20% of all the premium

credit card transactions.

So this is how within a short span of time, in Phase 1,

companies present incentives

in order to get customers to use their product, eventually,

to increase their user base.

And this is what brings us to Phase 2.

Phase 2 is all about habituation.

Once you bought a Jio sim, you never bothered about

talktime, you never bothered about data.

And we all recklessly got habituated to this newfound luxury

of Internet

Similarly, in case of CRED, the people who have 2-3 credit


found it so simple to use CRED that they stopped using their

conventional method

wherein they had to go through this long list of their


or putting in effort to dig in and find out whether there

are hidden charges, on each credit card

My uncle is a CRED user, I can’t even tell you how amazing it feels.

as compared to having this terrible feeling wherein you have

no idea where the hell your money is going.

In fact, there was a time when my uncle thought that some hacker is

stealing his money, alright ?

and I’m not even kidding about this.

So, this is how in Phase 2, using their super efficient


companies seemlessly get us habituated to new normal

wherein we are no longer used to adjusting to the ‘hurdles

of the system’.


Here’s where we enter the most crucial phase of all, that

is, Phase 3

and Phase 3 is what we can call as Irreversibility.

A classy example of the same is Google Maps

Now you might have observed that most of the people of our


never even bother to remember the name of a landmark, street

or chowk

In fact, I’ve got so used to Google Maps that in my own

city, if you leave me in some street

I will start wandering as if I am in some strange jungle.

That is how much I have got habituated to Google Maps

And by the way, this does not include those superhumans who

have this amazing memory

to remember any route, even if they have visited that place

only once

and you know which friend am I talking about…

So the point is, Google Maps has made our lives so easy that

finding a way to a place no longer occupies our headspace

and in case of CRED, users no longer have to remember to pay

their credit card bills,

they no longer have to remember when exactly is their due

dates or bother about late fees.

Similarly in case of Ola, we are no longer used to finding

taxi on the streets

In case of Jio, when there is no Internet you all know how

you feel

So you see, once these companies came in there has been an

irreversible change in our behaviour

wherein the small acts of booking a cab or paying a credit

card bill

has changed to such a large extent that we will never ever

go back to our past system.


Now CRED is yet to complete this phase

which is why all the numbers that you see about CRED is in

the negatives now

because CRED is yet to change a significant part of the

consumer behaviour.

After this we come to Phase 4.

Now, this is the goldmine that every investor waits for

wherein the company starts making profits

and if you look at the numbers, it literally looks like a


For that matter look at the numbers of Jio.

In just 1.5 years, Jio became profitable

that is in the 3rd quarter of 2017 with a profit of ₹504


From there onwards it has been on a magnificent run

wherein in 2020, Jio has posted a net profit of ₹5,562 crore

and the reason why CRED is also sitting on a similar


is because the customers of CRED are by default the richest

1% of the country.

These people are literally the dream customers of any


Their incomes are high, so they make expensive purchases on

a regular basis

which results into massive profit margins for every company

And my sense is that in the 4th phase, CRED could leverage

it’s golden customer base

in three very very powerful ways.

Number one, CRED could become this must have expense

management app

which will also allow it’s users to file their income tax

and just like it cured the headaches of the credit card


by saving their money from hidden charges.

CRED might also might start saving it’s customers a ton of


through their income tax rebate filings

by turning the entire process of income tax filing into a

very simple and efficient process

and if this happens, I don’t think any of us will ever leave

the CRED club.

So, Kunal sir if you’re watching this please help us out

over here.

Number two, CRED has one of the most valuable customer data

in terms of purchase preferences

For example, CRED clearly knows that Parsh loves to spend

₹20,000 into sports.

Ganesh loves to spend ₹10,000 in education and books.

So CRED could use this data to show relevant advertisements

with exclusive coupons

Tto get people to spend heavily on the things they

absolutely love

eventually, to make a comission out of it.

Lastly, CRED could also became a bank for the top 1% of


and the reason why I think so is because

there are two important factors that are very very crucial

for any bank’s existence.

Number one, every bank wants customers who have a lot of

money deposited in their bank account

after all their investment and expenses.

And this money is what the bank uses to lend to businesses

and customers

in the form of home loans, car loans etc.

Number two, every bank needs borrowers who pay back their

loans judiciously.

So that they can charge an interest on top of it

eventually to make money out of the lending business.

And guess what ? CRED literally has these exact people in

it’s customer base

which is why my sense is, CRED could literally extend itself

to become a full fledged bank

or maybe even become a full fledged portfolio management

system for the top 1%.

Eventually to become the most revolutionary fintech start-up

of India

So to put that straight, for people who are not rich

CRED might look like a weird idea

but in reality it is a revolutionary idea

coming from one of the most amazing entrepreneurs in the

Indian start-up space.

And we must consider ourselves to be extremely fortunate

that we are getting to witness their processes

and we must learn from these revolutionary start-ups

that are going to redefine 21st century India forever.

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