I found an answer to this question in an article on CRED in today’s TOI / ET.
In the process of helping the cardholder pay their bill, CRED accesses his or her purchase history. It then charges brands to run highly targeted ads basis cardholder’s shopping behavior.
Ads like:
#1.
“Cardlytics might identify active travelers based on their spending on hotel stays and airline purchases and work with merchants such as Airbnb Inc. to deliver them an offer.” (Source: Banks Will Know Chipotle Is Going Bankrupt Before Chipotle’s CEO)
#2.
“You spent $400 on Amazon last month. You could've used our Amazon Rewards Card. Here’s $300 to sign up for one”.
— Ketharaman Swaminathan (@s_ketharaman) November 9, 2018
Guess this is one of those targeted ads enabled by @cardlytics to foster loyalty & drive more sales via cross/upselling. https://t.co/CYpmWXnWk2 via @FinancialBrand
This is a fairly proven business model in the USA, with Cardlytics being the leading vendor in this space.
Cardlytics Vital Stats:
— Ketharaman Swaminathan (@s_ketharaman) September 10, 2018
* 2000 bank customers
* $1.5T purchase data mined
* 4% commission on sales uplift generated by its targeted offers
* $175M paid out to bank partners
* $150M revenues
* 50% stock price pop since IPO in Feb. 2018. https://t.co/5qxTo3qTJh via @Bloomberg
In principle, it should also work in India.
But question is, how will CRED be able to pull off its skyhigh valuation of reportedly $400M when Cardlytics, which has been around for a fairly long time, has a market cap of only $350M? Especially considering that:
- Digital ad revenues in India are very small compared to that in USA, going by the figures reported by digital advertising powerhouses Google and Facebook, and
- There are only ~40 million credit cards in India as against ~1.5 billion credit cards in USA.