Cred's Decline in Average Transaction Value Signals Potential Trouble

Cred, a platform specializing in credit card bill payments, is facing challenges in its growth strategy. The platform’s average transaction value has plummeted to a third, indicating potential struggles with its core business. Moreover, its market share in credit card bill payments and new sign-ups for the Cred app has reportedly declined.

What Happened? Per MoneyControl, the platform’s average transaction value through the Unified Payment Interface (UPI) fell from ₹13,300 in January 2022 to ₹4,529 in April, according to the National Payments Corporation of India. Meanwhile, the total value of UPI transactions on Cred increased by 46%, likely due to the merchant scan-and-pay service launched by the company last year.

Recent data indicates that Cred’s UPI transactions surge might be due to smaller transactions from its new service. Although more than 95% of credit card bill payments on Cred are made through UPI, the drop in Cred’s average transaction value suggests customers may be leaving or using the app less frequently.

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Cred disagrees with these interpretations, stating that the public data doesn’t reflect its growth over the past year. However, Cred didn’t disclose the volume of bill payments settled using UPI or other methods.

Despite credit card issuances rising by 22% and spending by 48% over 16 months, Cred’s UPI transaction value growth – at 46% – falls short. This lag occurs even when considering that most of the value growth did not come from bill payments.

Cred introduced the scan-and-pay facility at merchants last year and began UPI money transfers two months ago. Although UPI transactions on Cred nearly doubled over six months, its market share by UPI transaction value marginally declined, likely due to low-ticket transactions.

With other popular UPI apps offering credit card bill payment features, the question remains whether they are gaining at Cred’s expense. Currently, about one-third of credit card bill payments are made through these apps, with Cred accounting for 13%.

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