Expanding India's Credit Card User Base - Why We Invested In Kiwi

A few years ago, we surveyed hundreds of credit card users in the country. We realized that credit cards were a rare financial product in India with very high NPS - people love the product and wanted more and better cards.

People cited many benefits of the product: interest-free credit, wide acceptance, rewards and cashbacks, predictable cash outflow etc.This customer love is reflected in growth in credit card spends: monthly transaction value grew 3x over 5 years to Rs. 1.28 Lakh Cr ($16B).

However, this is still dwarfed by the real payment giant in India: UPI. Monthly transaction values on UPI are more than 10x those on credit cards and growing even faster (Rs. 14 lakh Cr or $175B).

Due to the high cost of card terminals as well as the cost of accepting credit card payments, only 6 million merchants accept cards, as opposed to the 50 million who accept UPI payments (P2M).

Most of us are regular users of both payment systems - credit cards and UPI. I find it frustrating that the credit card benefits I love are not available on UPI, and my card doesn't have the ubiquity of UPI. I often pull out my card, only for the merchant to point me to a QR code.

For a few years now, we have been wondering if we could combine the benefits of credit cards with the merchant acceptance of UPI. So far, we had only run into regulatory hurdles.Till a few months ago, when the RBI allowed Rupay credit cards to be used over UPI.

We were not alone in recognizing this as Aha Moment. Three senior fintech executives, Anup Agrawal, Mohit Bedi, and Siddharth Mehta were waiting for this opportunity.

All three were intimately familiar with both credit cards and UPI. Siddharth was the CEO of Freecharge; Anup the business head of Lazypay; Mohit till recently headed the credit cards business at Axis Bank. Within weeks of RBI's announcement, all three had quit their jobs.

The entrepreneurs are building Kiwi, a "credit on UPI" app that allows you to scan and pay using a credit card. On the Kiwi app you can apply for a virtual credit card that can be used to pay any merchant on UPI. The card is issued instantly and you can use it right from the app.

The card, issued by Axis Bank, offers all the benefits of a regular credit card: up to 45 days interest-free credit, monthly statement, reward points and cashback. But unlike a regular card, you can use it to buy a 10-rupee cup of chai.Check it out on gokiwi.in.

Stellaris Venture Partners and Nexus Venture Partners have together invested $6M in Kiwi, to help launch the first "credit on UPI" product in the country. By providing a card that works everywhere, they plan to massively expand India's credit card user base.

Sayantan and I look forward to working with Anup, Mohit, and Siddharth as they build Kiwi, and Anand Datta from Nexus on the board. Meanwhile, please take http://gokiwi.in for a spin and share your feedback.

Bonus: Here's Mayank's thread from a year ago explaining our credit-on-UPI thesis.