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.

https://twitter.com/s_ketharaman/status/1060917555165061121
This is a fairly proven business model in the USA, with Cardlytics being the leading vendor in this space.
https://twitter.com/s_ketharaman/status/1039128978995519488
In principle, it should also work in India.

But question is, how will CRED be able to pull off its skyhigh valuation (reportedly $400M) when Cardlytics has a market cap of only $350M?

Especially considering that:

  • Cardlytics has been around for a fairly long time
  • 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.