Kiwi: Revolutionising credit with UPI and RuPay cards

In a bustling fintech landscape, a newly launched startup named Kiwi is making waves by transforming how credit cards are issued and utilised.

With its innovative utilisation of ‘Credit on UPI’, a new feature introduced by the National Payments Corporation of India (NPCI), Kiwi aims to provide Indians with seamless access to credit using the famed UPI ecosystem.

By partnering with banks to issue RuPay Cards, Kiwi has become one of the first apps to offer customers the opportunity to experience ‘Credit on UPI’, and it has set an ambitious goal to become the leading issuer of RuPay credit cards by 2026.

Co-founded by esteemed fintech experts and banking industry veterans Siddharth Mehta, Mohit Bedi, and Anup Agrawal, Kiwi is tailored to cater to India’s urban millennials, specifically those aged 25 to 45 who either already possess credit cards or are eligible for them. With a vision to enable transaction credit access for 100 million users, the company is poised to tap into a vast market. India’s burgeoning Buy Now Pay Later (BNPL) market, estimated to be worth $3-3.5 billion today, has the potential to grow to an astounding $45-50 billion by 2026, according to consultancy firm RedSeer. Furthermore, the number of BNPL users in India could soar to 80-100 million by 2026 from the current estimate of 10-15 million.

Mohit Bedi, co-founder of Kiwi, said that it is exclusively banking on virtual credit cards as the only issuance mode to grow its user base quickly, rather than depending on plastic cards.

“Banks usually take 7 to 10 days to perform underwriting to final KYC to issue a credit card. We want to change this issuance timeline and bring it down to mere minutes. Kiwi will use video KYC to complete the document verification and use Aadhaar biometric to authenticate users. With Kiwi, we aim to issue virtual credit cards in 30 minutes automatically linked to the app to make payments to merchants,” added Bedi.

Apart from Kiwi, both GooglePay and Paytm are already offering credit payments using UPI, thanks to RBI’s notification which came in April 2023. Last month, RBI approved banks and other Third Party Application Providers (TPAPs) to tap into UPI to offer credit, paving the way for RuPay credit cards to be linked with virtual UPI addresses. Prior to this, a UPI user could only link the virtual payment address with debit cards.

What sets Kiwi apart from its competition is its complete end-to-end lifecycle management of the credit product within its app. The startup recognises that leveraging credit as a key attraction will fuel customer acquisition, particularly considering the massive user base of nearly 250 million UPI users, among which approximately 30 million are deemed creditworthy. This presents a tremendous growth opportunity for Kiwi, according to Bedi.

Kiwi’s ambitious plans include onboarding 1 million customers within the first 18 months. To support its goals, the startup has successfully raised $6 million in a pre-seed round from prominent investors such as Nexus Venture Partners, Stellaris Venture Partners, and several angel investors. Headquartered in Mumbai, Kiwi also has offices in Delhi and Bengaluru, boasting a dedicated team of 20 talented individuals.

Bedi also pointed out that Kiwi app users can scan QR codes and pay at any merchant that accepts UPI, allowing users to make even low-value purchases using pre-approved credit lines. However, experts have pointed out earlier that such low-value credit transactions could be risky when it comes to loan recollections.

While BNPL providers currently operate by charging a 2-3% commission from merchants for each transaction, allowing them to offer zero interest on transactions, experts caution that the convenience factor of BNPL could pose long-term risks for lenders. A 2020 report by global credit rating agency Fitch Ratings highlights the potential hazards of “adverse borrower selection” faced by BNPL providers. Given that small-ticket loans primarily attract users with limited financial headroom, adverse life events could lead to significant repayment challenges. Additionally, as these products primarily target young users, there is a risk of impulsive credit purchases beyond their means to repay.

BNPL providers in the country have already been disrupting consumer lending, expanding beyond traditional banking offerings. While banks traditionally focus on personal loans, home loans, and salary overdrafts, BNPL-based lenders have been venturing into credit for small-ticket purchases, such as online grocery shopping, food delivery, and other e-commerce categories.

These include those offered by fintechs like Simpl, LazyPay, and PostPe, which are gaining popularity among Gen Z and millennial users, often serving as their first exposure to credit.

Bedi, however, pointed out that to avoid these risks, the company will focus only on customer acquisition and leave user underwriting to its banking partners instead.

“As a third-party application, we can’t decide on the underwriting norms, because only banks can do background checks while issuing credit cards accordion to current regulations. While it is true that credit spending ticket sizes can be an indicator of the quality of the customer, we will only onboard those users who have a positive credit bureau rating,” added Bedi.