Cred’s new-user growth stagnates, increased UPI payment a silver lining

Cred’s new user growth stagnates, increased UPI payment emerges as a silver lining

Fintech Cred’s user growth has plateaued at 13 million users over the last 18 months, even as it expanded beyond credit card payments to offer wealth management, e-commerce, travel and automotive products and services in the last few quarters.

However, the silver lining is its rising share of digital payments via UPI, almost doubling its volume share from 0.5 percent last April to 1 percent in the first three months of 2024. In terms of value, the company’s market share has inched up from 1.5 percent to 2.3 percent this year.

According to data from app data tracking platforms Sensortower and Similarweb, Cred’s user base hit 13 million monthly active users (MAU) in November 2022 and has been around this figure for 16 consecutive months. In February 2024, the MAU stood at around 13 million. During most months, active users were moving a by few hundred thousand either way.

Cred's flatlining user growth comes amid a series of buzzy and viral advertisement campaigns during the popular IPL series featuring prominent actors and cricketers.

It has been among the most active startup advertisers over the last year or so even as lower funding has led several others to cut down marketing expenditure.

Cred did not respond to Moneycontrol's queries on the company’s flat customer growth or its changing business or growth strategies.

Change of strategy

“Cred has in between started acquiring customers with relatively lower credit scores in mid-2022, but those customers were not generating many transactions or buying more products and services on the platform. So, the company has gone back to its original thesis of having customers with higher credit scores by mid 2023,” says a former senior Cred official who left the company early this year.

Cred’s official position has always been that it admits only affluent customers with a credit score of 750 or more from rating agency CIBIL and has never whittled down on the policy.

Among the top five UPI players, other than Cred, only UPI market leaders PhonePe and Google Pay managed to increase their UPI market share during the same period. Other large players such as Amazon Pay and Paytm have also seen a considerable decline in market share.

“UPI payments were growing much faster than credit card payments even among affluent customers. The company wanted to a bigger play in the UPI payments space and it seems to be working as even without many customer additions the UPI share has been growing well,” the former executive added.

The gap in attracting affluent customers

Contrary to Cred’s initial image as an app for premium customers, 89 percent of Cred’s total downloads came from Android devices. Over the past three months, 90 percent of Cred’s MAUs came from Android devices, shows Sensortower data.

There are an estimated 30-40 million unique Apple users in India but according to Sensortwoer data, only 1.3 million of those have Cred. Apple customers are relatively more affluent since iPhone devices are much more expensive than Android devices in India and corner more than 60 percent market share in devices above Rs 50,000.

Cred has always maintained that it targets the top 40 million affluent customers with high disposable income, but these data points indicate that there is a challenge in attracting those customers.

“Among the most affluent customers, there is scepticism among customers about Cred’s use of data and app permissions. And their rewards or products are not enticing enough for these customers,” says a senior banker, who heads digital banking for a private sector bank.

Cred, founded by Kunal Shah, started as an invite-only app to pay credit card bills. The app credited cred coins for bills paid on the platform, which could be redeemed by customers for discounted products and services offline as well as online.

However, social media is replete with instances of affluent customers mocking Cred for the lack of value for its Cred coins.

The everything fintech app

Cred started attracting customers from a wider demographic and introduced UPI merchant payments in 2022, followed by UPI person-to-person (called peer-to-peer or P2P in UPI parlance) money transfers in 2023.

The company has been expanding its product portfolio over the last couple of years. While it had a limited ecommerce store, it added curated travel and hotel packages under Cred Escapes last March and Cred Garage for automotive-related products and services last September.

A couple of months ago, Cred acquired Kuvera, to enter the wealth management space. Kuvera had around three lakh affluent customers using its wealth products. Among the various products mutual funds and fixed deposits (FD) stand out as the most popular, besides other offerings such as SIPs (systematic investment plan), international equities (commercial arrangement with Vested Inc), pension funds, and digital gold.

Meanwhile, the average value of transactions on Cred through UPI continues to drop as the app continues to be used widely for UPI merchant payments and other relatively small-ticket payments, such as utility bill payments. When the biggest use case for Cred was a credit card bill payment, the average value of UPI transactions through Cred was as high as Rs 13,000 in January 2022. This has declined steadily to reach Rs 3,400 in March this year.

According to Cred, an average monthly transacting user (MTU) performs around 20 sessions on the platform, which may include credit card bill payments, other utility bill payments, travel packages, shopping, money transfers, and merchant transactions through UPI.

One of Cred's biggest revenue drivers and profit engines is its lending division, Cred Cash, which has disbursed about Rs 12,000 crore worth of loans, according to sources. Almost 90 percent of its revenues come from Cred Cash, utility bill payments space Cred Max and insurance services.

A credit card bill payment in itself does not generate revenue for Cred. It is mostly a reason for the company to attract premium customers.

Today, about a third of credit card bill payments are made through popular UPI apps.

The financials

Cred has reported Rs 1,400 crore in revenue from operations for FY 23, a 256 percent growth over the Rs 393 crore that the company reported in FY22. Its losses grew marginally to Rs 1,347 crore in FY23, widening by 5 percent from Rs 1,280 crore in FY22. as Cred reduced its customer acquisition cost by around 80 percent over the past four years.

While Cred has raised over Rs 8,000 crore (around a billion dollars) to date, its cash reserves now stand at around Rs 2,050 crore. Based on its FY23 losses, this cash runway would last for the next three years.

Cred was valued at more than $6 billion in late 2022. Among its investors are Tiger Global Management, Sofina, Alpha Wave Global, Dragoneer Investment Group, DST Global, Ribbit Capital, General Catalyst and Peak XV Partners (formerly Sequoia Capital).

The company  said it had around 12 million users as of September last year, while announcing its financials. In contrast, the country's unique credit card customers are estimated to number around 40 million. Recently, the number of credit cards issued in the country crossed 100 million, with most affluent customers using multiple credit cards.