India’s fintech sector experienced a significant drop in funding in 2023, with inflows decreasing by 63% to just $2 billion, according to a report by Tracxn. This is a notable decline from the $5.4 billion raised in 2022 and $8.4 billion in 2021.
India Maintains Global Standing Despite Decline
Despite this significant reduction, India remained the third-largest recipient of fintech funding globally in 2023. The tightening of funds worldwide is attributed to rising interest rates and uncertain macroeconomic conditions.
“Even with a 63% decline, India’s fintech sector remains robust, ranking third globally and highlighting its innovation potential. Regulatory measures and government initiatives in digitalization promise a bright future,” commented Neha Singh, co-founder at Tracxn.
Noteworthy Funding Rounds and Unicorn Emergence
The year saw only one new unicorn, InCred, amidst five notable funding rounds exceeding $100 million. Perfios, a real-time credit decision platform, raised $229 million in a Series D round led by Kedaara Capital. Mintifi, an online business loan marketplace, secured $110 million in a Series D funding round led by Premji Invest.
Industry Consolidation and Acquisitions
Consolidation within the sector continued with 31 acquisitions, matching the previous year. Significant deals included BharatPe’s acquisition of TrillionLoans for $36 million, M2P’s acquisition of Goals101 for $30 million, and LendingKart’s acquisition of Upwards for $12.1 million. In 2023, two companies, Zaggle and Veefin, announced IPOs, down from five the previous year.
Funding Slowdown Across All Stages
Funding decreased across all deal stages, with late-stage rounds dropping by 56%, early-stage rounds plummeting by 73%, and seed-stage rounds falling by 69%.
Alternative Lending and Banking Tech Thrive
Certain sectors within fintech, such as alternative lending, payments, and banking tech, continued to perform well. Alternative lending received $835 million in 2023, compared to $2.28 billion in 2022. The BNPL (buy now, pay later) segment grew significantly, driven by widespread adoption within India.
The digital lending space is set for further growth due to the government’s new Digital Personal Data Protection Act, aimed at enhancing transparency and customer trust.
Banking Tech and Digitalization
Banking tech secured $331 million in 2023, half of what it received the previous year. However, digital banking saw extensive adoption due to increased internet and mobile device penetration in both urban and rural areas.
The Indian government’s investment of approximately $16.7 billion in the BharatNet project, aimed at expanding broadband connectivity in rural areas, is expected to attract more investments into the sector.
Key Investors in 20223
Leading investors in the fintech space included Peak XV Partners, Y Combinator, and LetsVenture. Seed investments were dominated by We Founder Circle, Y Combinator, and 100X.VC. Accel, Omidyar Network India, and Elevation were notable early-stage investors, while OP Finnfund Global Impact Fund led late-stage investments in 2023.
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