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CRED's Late Entry into BNPL and Retail Payments

A Game Changer or Too Late to the Party?

5 March 2023

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Jayashri Ghorpade

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  • CRED faces similar struggles as other Indian unicorns, despite its founder Kunal Shah and Bengaluru-based headquarters.

  • As it expands into new sectors for profit, challenges may arise.

  • CRED is expanding into lending with CRED Flash, a buy-now-pay-later service and a tap-to-pay option for retail payments via credit cards.

  • Which could complicate its existing fintech and ecommerce offerings.

 Though CRED's founder Kunal Shah and the company's Bengaluru-based headquarters may seem grand, the fact remains that CRED shares the same struggles as many of India's top unicorns. Nonetheless, as CRED ventures into new sectors to increase its profitability, there may be hurdles that lie ahead.


While questions about CRED's profitability compared to its valuation are not new, recent data showing a cumulative operating loss of $5.9Bn in FY22 for 74 unicorns (55 of which incurred losses) has raised eyebrows. CRED has yet to become profitable while other fintech companies like Paytm and PhonePe have also struggled to show signs of profitability due to the strict regulations governing fintech models.


Startups such as Slice, Uni, OneCard and many others have been dampened by the RBI's notification for prepaid payments instruments (PPI) in 2022, affecting the credit card challenger model. Additionally, UPI has revolutionized payments, but the profitability of UPI apps has been caged by schemes like zero merchant discount rate, which have ironically played a crucial role in driving the growth of UPI, surpassing credit cards, in the digital payments space.


The digital lending space remains the biggest revenue channel for fintech startups, with investment tech and insurance businesses relying mainly on low-margin commissions. However, many companies are vying to capture even a small share of the lending opportunity. There is potential for UPI payments to generate significant revenue for fintech apps, but this is contingent on the elimination of the zero MDR regime. The introduction of the wallet-like UPI Lite feature is seen as a step in this direction, with the possibility of higher value UPI transactions attracting MDR in the near future. However, this is still speculative in nature.

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CRED is venturing into lending with CRED Flash, a buy-now-pay-later service, and a tap-to-pay option for retail payments using credit cards, in addition to UPI. These new verticals could complicate CRED's existing fintech and ecommerce offerings. While CRED aims to increase monetisation through MDR on credit card payments and interest on BNPL, its target audience is limited. Additionally, it remains to be seen if CRED's 500 merchant partners, bill payments, and ecommerce marketplace are enough to compete with rivals with wider reach.


CRED now offers BNPL, in addition to its personal loan service CRED Cash and P2P lending platform CRED Mint, exclusively to its 11.2 million users with a credit score of 750 or higher. CRED Cash reportedly had a loan book of INR 2,415 crore in August 2021, making CRED the leading fintech lender in India, but it remains unclear how much it has grown since then. However, with a focus on BNPL, there is no certainty that CRED will become profitable through this push alone.

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