CRED Tosses Its Hat In The PA Ring

Adding another feather to its hat, CRED has secured the RBI’s approval to operate as a payments aggregator (PA). With this, the fintech startup will now be able to onboard merchants, process digital transactions, and settle payments across multiple payment instruments such as cards, UPI, and net banking. 

CRED secured an in-principle approval for the PA licence in 2024. Such approvals typically come with a long list of compliance, operational, and technology requirements. 

This also serves as a critical milestone for Tiger Global-backed CRED’s steady push to penetrate deeper into the country’s payments ecosystem. The approval gives the Bengaluru-based startup, which has been gradually expanding its fintech footprint, greater control over how money moves within its ecosystem. 

More than anything, it is a signal that CRED now wants to own and dominate the payments value chain, rather than remaining dependent on third-party infrastructure providers. 

But, while CRED has been pushing to evolve from a credit card bill payment platform into a full-stack fintech superapp, spanning payments, lending and wealth products, why does securing a PA licence matter so much for CRED at this stage of its growth? Let’s explore in this edition of The Outline.

The Need For A PA License

Until now, CRED largely relied on third-party payment aggregators to process transactions happening on its platform. With a PA licence in place, the startup will now be able to route these transactions through its own payment infrastructure. 

With this, CRED will no longer need to share commissions with external payment aggregators. Instead, a portion of the merchant discount rate (1-2% of the transaction amount), which is currently being shared with third-party players, is expected to have a positive impact on its top line 

According to industry experts, “With a PA licence in place, the startup will have stronger control over transaction processing. This will not only improve reliability and speed, but also help CRED create a more seamless payment experience for merchants.”

While CRED already works with merchants via CRED Store, CRED Rewards, and CRED online pay, with the RBI’s nod for a PA licence, the startup will now be looking to onboard more merchants in the coming months. 

The company, however, hasn’t disclosed much about its plans.

A Leap Beyond Bill Payments

Bagging a PA licence also bodes well with CRED’s broader strategy that has been unfolding for the past couple of years. 

CRED built its early popularity by rewarding users for paying their credit card bills on time. Today, the startup’s product stack comprises a wide range of financial services, including CRED Pay, CRED CASH+, CRED Money, and CRED Mint, each targeting different segments in the financial services ecosystem. 

Through these products, CRED has gradually expanded into areas such as merchant payments, lending, and other financial services. Beyond this, the startup also offers CRED Escape (a curated, premium travel vertical within the CRED app for members with high credit scores) and CRED Garage (a CRED app feature for managing vehicle documents, expenses, insurance, and maintenance logs).

Alongside this, the startup has also been securing multiple regulatory licences. While the PA license is the latest in its stable, CRED already has a PPI licence, an insurance licence from IRDAI, and a third-party application provider licence from NPCI. 

These licences only strengthen the startup’s regulatory position across different layers. “The flexibility to offer multiple financial services such as payments, lending, and wealth management becomes much easier when you have the full stack of licences, and it also ensures these services remain regulated,” a fintech expert said. He added that these licences have helped CRED gain trust and keep multiple avenues open. 

CRED Enters Crowded Payments Race 

Owning a payments infrastructure is imperative for building a fintech startup in the country. From ordering groceries on quick commerce platforms to paying for software subscriptions, every digital business today relies on a robust payment processing system.

By owning its own payment aggregation layers, the startup is likely to get access to a steady stream of transaction data that can be utilised to build risk models for its lending products and more targeted offerings for its customers.

However, the payments infrastructure space is already crowded with deep-pocketed players. Startups such as Razorpay, IPO-bound PhonePe, listed Paytm, and Prosus-owned PayU already operate large-scale payment processing businesses with massive merchant networks in comparison to CRED’s.

In such a competitive landscape, the only advantage that CRED has is its affluent consumer base that has a stronger engagement with its premium financial products. But would that be enough to give CRED the leverage to capture a larger share of the fintech value chain, helped by a PA licence?  

Edited By Shishir Parasher
Creatives By Abhyam Gusai

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