Meta, the parent company that owns Facebook, Instagram, and WhatsApp, announced earlier this week that it has made a $900 million investment in Bengaluru-based startup Cred.
Cred is a fintech startup founded by Kunal Shah, who now will take over as the global head of Meta’s WhatsApp messaging platform.
While the Meta-Cred deal signals the US-based tech major’s growing ambitions in India’s digital payments and financial services market, it has also sparked concerns about data crossing borders. The huge investment, combined with a leadership role, has made the deal the focus of attention.
RT examines the multiple layers of the partnership.
Cred started as a platform that rewarded users for paying their credit card bills on time. Founded in 2018 by Shah, it targeted financially responsible high-value customers, enabling the platform to build a user base of affluent Indians.
The platform later widened its reach beyond credit card payments, offering a host of services, including UPI (Unified Payments Interface) and merchant payments, apart from lending products, insurance services, and wealth management tools. In effect, Cred transitioned to a broader fintech platform rather than being a one-trick pony.
Cred was valued at $6.4 billion during the peak of the startup funding boom in 2022, but later saw a significant valuation drop due to cautious investor sentiment.
The new deal with Meta gives the US tech giant a minority 20% stake in Cred at a valuation of $4.5 billion. Cred has said it will not share the startup’s customer data with Meta.
Cred’s overwhelmingly urban and higher-income customer base set it as a prime target of global majors, with Meta finding it an attractive proposition in a major market such as India.
The South Asian nation is one of the key markets for Meta, with millions of users on Facebook, Instagram, and WhatsApp. India has over 850 million WhatsApp users, making it the app’s largest global base.
Meta has repeatedly tried – and thus far failed – to transform this massive user base into a dominant digital payments force. WhatsApp Pay, which was positioned to become a major force in India’s UPI ecosystem, remains a minor player in a crowded market dominated by leaders PhonePe and Google Pay, which have cornered the lion’s share of UPI transactions.
Meta sees the payments gamble as a crucial part of a larger digital commerce strategy. For example, it could have a user find a product on Instagram, discuss it with peers on WhatsApp, and make the payment through its own platform – an ecosystem of embedded loyalists within the Meta-verse, so to speak. Cred is an ideal bet to pull this off, with expertise spanning payments, lending, and financial products.
The deep understanding of Indian consumer traits and its complex and highly competitive fintech landscape that Cred offered were tantalizing add-ons.
Shah is not a newcomer to the financial ecosystem. Before launching Cred, he founded FreeCharge, a digital payments company, which was later sold to Snapdeal. A deep knowledge of consumer behavior and financial technology propelled him to the highest echelons of India’s startup ecosystem.
Shah’s appointment as the global head of WhatsApp is a hint that Meta sees a goldmine in his leadership abilities. Meta can count on him to infuse fresh thinking in WhatsApp and to boost the app’s floundering payments strategy – not only in a huge market like India, but in other countries as well, as digital transactions gain increasing appeal among global consumers.
The deal announcement spurred discussions over data sovereignty and the role of US-based tech giants in India’s fintech sector as well as their access to the vast financial data generated by Indian consumers.
A report by Global Trade Research Institute (GTRI) warned that Meta’s investment in Cred could deepen foreign tech influence over India’s fintech sector and consumer financial data. The think tank has urged greater transparency on data‑sharing safeguards and stronger regulatory oversight of the deal. GTRI founder Ajay Srivastava noted that the Meta-Cred transaction “comes at a time when India’s digital-payments ecosystem is increasingly dominated by platforms linked to US firms.”
Allowing global firms to hold sway over public digital infrastructure risks of foreign-controlled ecosystems gaining access to valuable financial data assets, the GTRI report argued, noting that Cred processes more than 40% of India’s credit-card bill payments.
“The central issue is not whether Meta gains access to Cred’s data today. It is whether India is gradually allowing control over the financial data of millions of economically active citizens to migrate into foreign-owned digital ecosystems,” Srivastava wrote.
Data sovereignty concerns linked to startup acquisitions and regulatory oversight have also been flagged by a Mumbai-based entrepreneur Arnab Mitra. The deal is “data arbitrage at national scale,” he said in a LinkedIn post, citing that Meta would have access to “25 million Indian credit profiles. Affluent. Verified. Creditworthy.”
India’s Digital Personal Data Protection Act 2023 stipulates explicit consent before personal financial data is transferred to any third party and restricts cross-border transfer of personal data to countries not on an approved whitelist. According to Mitra, the catch here is that the government “has not notified the whitelist, and the US is not on it yet.” The implications are that data crossing borders is not a possibility that is ruled out.
In 2021, the Competition Commission of India (CCI), the national antitrust regulator, penalized Meta over WhatsApp’s privacy policy and the way user data was collected and shared with other Meta companies.
It remains unclear to what extent the CCI – whose approval will be required for the deal to go through – will be willing to probe the deeper contours of the transaction and focus on data concerns, rather than limiting itself to competition issues.
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