CRED entering stock broking market to take on Zerodha, Groww
What's the story
CRED, one of India's top fintech firms, is expanding its financial services portfolio by entering the stock broking space, according to Moneycontrol. The company has applied for a stock broking license via its subsidiary, Spenny. The development comes nearly a year after CRED acquired Spenny, a Y Combinator-backed micro-savings and investment platform. The acquisition was part of CRED's larger plan to become an all-encompassing financial services provider.
Market entry
Expansion into competitive stock broking market
CRED's entry into the stock broking space pits it against established players such as Zerodha, Groww, and Angel One. The company sees this move as a natural extension of its existing services, not a departure from its core business. The strategy is in line with CRED's gradual expansion beyond its initial focus on credit card bill payments, into payments, lending, insurance, and wealth management.
Diversification
Wealth management and lending services
In early 2024, CRED acquired Kuvera, a wealth management platform, which further bolstered its financial services portfolio. The company plans to offer investment products such as direct mutual funds, SIPs, fixed deposits, and digital gold to its users. Despite these expansions, lending continues to be a major revenue driver for the fintech firm.
Strategy
Cautious approach and customer-centric strategy
CRED's founder Kunal Shah has previously stressed the company's cautiousness in launching new products. He had said, "We have been able to demonstrate our ability to cross-sell different products. Customer monetization in financial services is easier." Shah had also assured that CRED would never launch a speculative product promising quick returns or sell high-interest rate loans or products harmful to customers' financial health.
Revenue prospects
Potential revenue opportunities in stock broking
Entering the stock broking sector could also give CRED more revenue opportunities from transaction fees, account management and possibly advisory services. The brokerage segment has become a major growth driver for Indian fintechs. For example, Zerodha posted a revenue of ₹8,320 crore with ₹4,700 crore profits while Groww's brokerage unit witnessed a 308% growth in net profit.
User base
User base and market challenges
CRED could leverage its existing user base of approximately 1.3 crore users and 1.1 crore monthly transacting users (MTUs) to cross-sell products. However, entering the stock broking space won't be a cakewalk with established players like Zerodha, Groww, Angel One and new entrants like PhonePe giving tough competition. Despite the challenges, CRED reported a revenue of nearly ₹2,500 crore in FY24, a whopping threefold increase in just three years.