Why CRED needs to win the CBDC Race
They finally have a chance to get a UPI-like distribution
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UPI Apps Are Extremely Habit-Forming
Let's forget CRED and CBDC for a moment and just think about how habit-forming UPI apps are. Think about the last time you changed your UPI app. A staggering 93% of the market is owned by just three players - PhonePe, Paytm and Google Pay. These apps pull out all the stops to reinforce this habit--reward programs, generous cashbacks--we've all been there.
And the most astonishing thing, they do all of this and still make no money on any of the UPI transactions you make on them (they do make money in some cases, but I'm overlooking those for now).
But why?
Distribution Through UPI Is What Creates Successful Superapps
Well, it's because UPI transactions are a very powerful way for these superapps to gain distribution. Yes, they make no money on any of the transactions, but every other feature on the superapp is designed to generate revenue. That's the beauty of the distribution you get by being a dominant UPI player. Google Pay generates revenue through the instant gold loans that it provides; PhonePe generates revenue when you pay bills through it--you get the point.
But none of this would be possible if they didn't have a lion's share of the UPI market.
CBDC & UPI: Two sides of the same coin
Now let's look at Central Bank Digital Currency (CBDC) or E - Rupee which is simply a digitised form of the physical currency we have at the moment. But this is where things get interesting. The RBI has been pushing CBDC since 2022 as a complementary technology to UPI. It is being called the technology that will push us toward a "less-cash economy" and increase financial inclusion in the country.
CRED Is the 5th Largest UPI Player With a Market Share of Less Than 1%
CRED is currently the fifth largest UPI app on the market after Navi UPI overtook it on 18th November of last year. CRED finally has a chance to gain a UPI-like distribution by being early on CBDC. They realise the distribution upside that you get by being a dominant player. They need to win the CBDC race.
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