Funding in India’s fintech sector saw a whopping decline of 63 percent, a report by data intelligence platform Tracxn has said. The sector, which had been booming over the past years, witnessed dampened investor sentiments amid a funding winter.
The FinTech sector received funding of $2bn in 2023, a decline of 63% and 76% compared to previous years – $5.4bn raised in 2022 and $8.4bn in 2021, respectively, the report added.
The year 2023 wasn’t particularly good for India’s startup ecosystem as only five $100 million+ funding rounds took place.
InCred was the only unicorn created in 2023, while it saw 31 acquisitions and 2 IPOs. Bengaluru led the funding in the Indian FinTech space, followed by Mumbai and Jaipur.
“Like all other sectors, funding in the FinTech space has also been experiencing a downward trend in India as well as on a global scale. The FinTech sector received funding of $2bn in 2023, a decline of 63% and 76% compared to previous years – $5.4bn raised in 2022 and $8.4bn in 2021, respectively. Despite the challenges posed by factors including increasing borrowing costs and macroeconomic conditions, among others, India has become one of the world’s top-funded countries. According to the report, India ranked 3rd globally in 2023 in terms of FinTech startup funding, strengthening its position as a significant player on the global stage,” the report said.
India has emerged as the global leader when it comes to digital payments. The country recorded transactions higher than the top 4 leading countries combined, recording 89.5 million transactions in 2022.
Alternative Lending received funding of $835 million in 2023, down from $2.28bn in 2022. The BNPL segment saw significant growth due to its adoption within the country, which contributed to the growth of the sector. The digital lending space, which increasingly relies on customer data for its product marketing and development, is also likely to grow owing to the government’s recently launched Digital Personal Data Protection Act, which will ensure more transparency and customer trust in the sector.
Banking Tech received funding of $331Mn in 2023, dropping more than 50% compared to the $671Mn funding received in 2022. This segment has substantially benefited from digitalization, and digital banking has seen widespread adoption due to rising internet and mobile device penetration in cities as well as rural areas. Additionally, the Indian government has recently allocated about $16.7bn towards the BharatNet project to increase broadband connectivity within rural areas, which will help widen the reach and potentially attract more investments into the sector.