Last week, credit card payments company CRED launched a brand-new product called CRED Pay. I got to know about it because someone sent me a link to a launch video made by the company.   

Or maybe it was the week before. It’s all confusing because the video gave me a minor seizure and I had to take some time off to recover. 

Anyway, after double-checking if what I’d watched really was a product launch announcement and not a trailer for Brahmastra, this is what I understood: 

1. CRED Pay is essentially a way for CRED’s users to pay using UPI. Open CRED, scan a QR code, and pay. Just like Google Pay, PhonePe, or any of the million UPI apps out there. 
2. For every payment, CRED’s users will get rewards and cashback. Again… Just like Google Pay, PhonePe, or any of the million UPI apps out there.
3. CRED’s users have a couple of other benefits, like an option to hide sensitive details from merchants, or a guaranteed refund for failed transactions. Okay. Fine. 
4. Then, there’s a bunch of vanity features, like the ability to personalise the scanner screen (why?) and collect flairs after payments (again, why?)

That’s it. That’s the product. 

Look, this is not a knock on CRED. UPI has been around for nearly six years, built on a common public payments infrastructure with standard open APIs. It’s nearly impossible to build a differentiated product on it, even if you are a US$6-billion company.

And yet, for some reason, nearly half a decade after everyone else, CRED’s decided to do it. 

I wanted to find out why. 

Now, fintech in India has always been action-packed. But of late, it seems to be even more dynamic and fluid. There’s UPI, there’s lending, there are account aggregators, neo-banks, and much more. And then there’s the RBI. (If you want to make sense of all this, please follow my colleague, Arundhati, who happens to be one of the best fintech reporters in the country)

To understand why CRED suddenly discovered UPI, I had to talk to an expert from the industry. So I got in touch with Abhishek Madan, who works as VP Product at Paytm. For me, Madan is the authority on fintech consumer payments, especially UPI. He has a deep knowledge of all the intricacies and details, along with the ability to zoom out. He usually has to explain everything slowly to me, often repeating himself multiple times patiently until I finally start to make sense of it all. 

Anyway, when I asked Madan about CRED and UPI, his response surprised me. 

“Have you read the latest NPCI circular which was released today?”

I hadn’t. 

“Read it first. It’ll all make sense”

The NPCI (National Payments Corporation of India) is a not-for-profit organisation responsible for operating the payments infrastructure of India’s digital banking space. Like the UPI. And the document that Madan was referring to was released on 4 October—titled “Operating circular for RuPay Credit Cards linked to UPI”. It’s four pages long.

I read it. 

And it all made sense. CRED. UPI. Credit Cards. It was all connected. 

Let’s dive in. ​

CRED and UPI are like two star-crossed lovers. So similar. And yet so different. And never meant to be together. 

First, there’s UPI, which was built as a digital public good. Practically anyone can build an app on it, and use it to send and receive payments. And over the last few years, its usage has sky-rocketed. It almost single-handedly brought about India’s digital payments revolution. As many techbros smirk and point out on Twitter and LinkedIn in long threads, UPI is India’s true homegrown revolutionary product. There isn’t a single global comparison. It works like magic. And above all, it’s free.  

Then, there’s CRED, which is as exclusive as it can be. CRED, as you probably know, is an app that helps you manage and pay your credit card bills. It proudly positions itself as a product for the 1% and exists to “reward the creditworthy”. Essentially, you pay your bills on CRED’s mobile app… which is… er… uniquely designed. If you do this, CRED gives you some coins, which you can use to get some rewards on premium brands, discounts on products, and the occasional photosensitive epilepsy. In the last few years, fuelled by a national brand advertising campaign during the Indian Premier League, CRED has become one of India’s most valuable startups, last valued at a little over US$6 billion. 

If CRED is the rich girl in the love story, UPI is the poor boy. 

Go back a few years and this is what India’s digital payments workflow looked like.

If you wanted to transfer money to someone or pay your bills you had to go to your bank’s website or app. Also, if you wanted to pay your credit card bill, you had to go to your… bank’s website or app. And in return, the bank would give you some rewards, or discounts. This happens even today, but a few years ago, this was the only way to do any kind of digital payments. 

But when UPI and CRED arrived, they disaggregated banks from both directions. 

Essentially, UPI became a way to transfer money and pay utility bills directly from your bank account. And CRED was a way to manage and pay your credit card bills in exchange for rewards and discounts. And all of a sudden, you didn’t need to go through your bank’s website at all. 

Now, even though the banks were unhappy, they could take some solace in the fact that UPI, at some level, was still theirs. That’s because the NPCI is owned by banks. 

CRED on the other hand, was different. 

I’ve written before about the shallowness of India’s digital consumer market, and in it, I described the top-end of the market as India’s California users. These are the users, I wrote, who have a disproportionate share of India’s disposable income, and “pay their bills on CRED”. 

The segment of India’s California users comprises about 10 million people. 

As of today, CRED claims to have somewhere around 9 million users. 

CRED is a product that has been created to solve a problem that didn’t exist in the first place. All that CRED wanted was to collect India’s most lucrative users in one place, all patiently acquired by the lure of discounts and rewards, and nostalgia-focused marketing campaigns. Credit card bill payments were simply a means to achieve that end. In the end, CRED needed India’s best users. And it finally got them. 

That’s because CRED knew where the real money was.

It’s the holy grail of every fintech company today.

Because it has always been the holy grail of banks for thousands of years. 

The problem for banks is that many of them suspect that CRED is giving loans to its users to help them pay back their credit card bills. This is especially annoying for banks because if this is true, then in effect, CRED is eating their lunch. The annual interest rate on a personal loan is about a fourth as the interest charged on credit cards. Also, CRED, by virtue of its position where it has aggregated multiple credit cards from different banks for a user, has the ability to tip spending in favour of one card or the other. 

Well, let’s just say banks aren’t too happy about this. 

But there’s a problem for CRED too. 

Not from banks, but from credit cards. 

As of last month, there are around ~77 million credit cards in India. By some estimates, the number of credit card users in the country is somewhere around ~35-40 million. This means that CRED has already acquired about 25% of India’s credit card users—a pretty sizable chunk. It’s also reasonable to assume that CRED’s acquisition cost is going to rise steeply if it intends to go deeper into this market to acquire more credit card users. It’s not even clear if Cred wants to acquire more users. 

Maybe the remaining credit card users aren’t worth much. Just like CRED coins. 

All of that, though, is nothing compared to how the RBI views credit cards. 

I don’t know exactly why, but it’s fairly evident that the RBI has decided that credit cards in its current form are fundamentally behaving very badly. And it has made it its life’s mission to discipline and set them on the right path. Over the last year or so, the RBI has pursued this agenda with a terrifying focus and zeal. 

First, it killed recurring payments, then it insisted that merchants had to stop storing customer card data, then placed restrictions on increasing credit limits and charging interest. Just a few months back, it stopped prepaid cards from extending credit lines to customers, effectively kneecapping fintechs like Slice, Uni, and LazyPay. 

Then on top of all this, the RBI insisted that banks deactivate cards older than a year, and for the first time, the number of active credit cards in India declined last month.

In short, the RBI is not a fan of credit cards.

Which brings us finally to the NPCI circular, the one we mentioned right at the beginning of this story. 

Now that you have some context on how the RBI has been taming credit cards, the circular makes for incredible reading. An executive at a leading fintech company described it to me as “a piece of science fiction”. 

I’ll explain what he meant by that, but to do so, we must first look at how UPI exists today.

Essentially, UPI is linked to one or more bank accounts, which is on your device, and can be used to receive or send payments. To incentivise these transactions, the UPI app may give you rewards, loyalty, or discounts. Google Pay. Phone Pe. All of these work this way. 

What the NPCI circular does is operationalise the framework to link credit cards to UPI as well. This was announced by the RBI a few months ago starting with Rupay cards, and this circular is the first step to showing us what that integration will look like. In the circular, the NPCI describes all the things that banks will need to do to enable credit cards to be integrated. Users must be able to find and link credit cards using just a phone number. They must be able to claim rewards, redeem points, and billed and unbilled amounts on their apps. Dues must be cleared immediately in real-time on payment. Users must be able to set or reset their PIN during onboarding. 

The reason this sounds like science fiction is because most banks don’t even offer these services to customers on their own apps for their own credit cards. 

But you know who does?

Yup. 

CRED. 

When I spoke to Abhishek Madan, he told me, “To an extent, a lot of CRED’s work will become platformised by the NPCI. For example, take the example of how the circular says that a credit card will be linked to a phone number, so it can be fetched like a bank account. CRED had to do a lot of work to make theirs as seamless as it is today”. 

So very soon, UPI will start to look more like this.

Take a look at that diagram. See how the left side of that looks almost exactly like CRED. There are credit cards, bank accounts, and rewards. In fact, if you scroll up, you’ll see that the CRED of today is structurally identical to the UPI apps of the future. 

So what did CRED do? 

Well, it had no option but to build out what UPI apps have, and it doesn’t.

In the future, both CRED and UPI apps are going to look identical. Both will be linked to credit cards and bank accounts, make credit card bill payments seamless, and give rewards and discounts. And they’ll both be used to make and take payments using UPI and QR codes. 

CRED and UPI are like two star-crossed lovers. So similar. And yet so different. 

And the reason why CRED wants to become UPI is simple. 

It’s because UPI wants to become CRED.