Decoding CRED : Part 2

There is nothing unique about acquiring customers by offering something extra for free, even our vegetable vendors have been doing this for ages. This is the reason he throws in those extra curry leaves in your bag whenever you buy vegetables from him. How often though have you seen a vegetable vendor giving away curry leaves for free but no vegetables to sell. Right now that is the situation of CRED. They have a customer acquisition strategy, but no core business model.

In my last post I talked about CRED transforming into a digital mall and offer their digital real estate for a fee to various D2C brands, however the unique part about these brands in D, they want to sell direct to the consumers by cutting the middlemen and pass on that value to the customers because internet has made it possible. Introducing CRED as a middle party defeats the whole D part of D2C. Also when the nearby shop with same footfalls in available for almost free, why would any brand pay high value for opening the shop in the Mall. This is the digital world. These brands when they are new might use CRED for few months of promotions and then divert the customers to their own digital shop (app or website) rather that sticking with CRED forever.

I think CRED team has also realized this and that is why they are now trying to pivot into becoming a fintech by offering services like rent payment and consumer loan. There have already been many rent payment options already existing in the market like Red Giraffe and No Broker, who even offer better deal than CRED in terms of transaction fee. Rent payment on Credit Card is something I would personally not recommend, however if you are a super premium card holder with superior reward program like more than 3% cashback or something similar then paying rent through CC may yet make some economic sense, however there are not many card holders that fall in that segment, and many who do are likely not living in a rented house.

Now on the consumer loan part, as of now as per my knowledge CRED is not an NBFC and offering this in partnership with some other lender. The problem with this option is that entire customer base of CRED is already eligible for a better deal offered by his/her bank. Some people say convenience may drive CRED users opt for the option offered through CRED than their bank, well in that case you do not understand the Indian consumer. First of all Indian consumer, no matter how rich prefers the option that gives him/her better value also CRED themselves don’t believe in that convenience hypothesis, that is why they sell themselves as “most rewarding way to pay your Credit Card bill” instead of “most convenient way to pay your Credit Card bill”.

Please also note that the customer base of CRED is the same customer base that banks also treasure. They typically get a dedicated relationship manager or personal banker. Banks will not let this customer get away, and even if by some odd chance CRED sees some traction in this regards banks may even try to block CRED something like what few banks did when they started seeing wallets as a threat.

So in the current situation they have nothing going for them in terms of a visible business plan hence they are spending all their energy on UI/UX, someone in the boardroom might be like “at least make it look premium so that the customer sticks around”.

Now question is what they could do, the only thing that comes to my mind is they can become a discovery platform for semi-luxury lifestyle goods, however with the economic slowdown caused by this pandemic, this semi-luxury consumption will see a steep downfall. My definition of semi-luxury is luxury items for upper middle class.