The total funding Indian fintech sector has dropped to USD 795 million, marking an 11 per cent decrease from the latter half of 2023 and a staggering 59 per cent drop compared to the first half of 2023, according to the Tracxn Geo Fintech- India semi-annual funding report.
This decline can be attributed to a confluence of geopolitical and economic factors. Despite the downturn in Fintech funding, the Indian economy has demonstrated robust performance, with a gross domestic product (GDP) growth rate of 8.2 per cent for the fiscal year 2024. This paradox of economic resilience amid sector-specific funding challenges highlights the complex landscape facing the Indian Fintech industry.
In an effort to stabilise the sector, the Reserve Bank of India (RBI) has introduced a framework for self-regulation within the Fintech industry. This move aims to reinforce trust and ensure sustainable growth, addressing some of the underlying concerns that may be contributing to the funding decline.
Sector Performance And Trends
The report reveals that alternative lending remains the dominant segment, attracting USD 646 million, which accounts for 81 per cent of the total fintech funding. Other notable sectors include regulatory technology (Regtech) and banking tech, which continue to innovate and attract investment despite the overall downturn.
Total funding in H1 2024 was USD 795 million, an 11 per cent drop from H2 2023 and a 59 per cent decrease from H1 2023. Late-stage funding saw a modest increase of 26 per cent from H2 2023, although it still reflects a 63 per cent decline from H1 2023. In contrast, early-stage and seed-stage funding have seen significant decreases, indicating a potential slowdown in the entry of new players into the market.
Major Deals And Emerging Unicorns
Despite the funding challenges, the Fintech sector witnessed some substantial deals. Noteworthy funding rounds included USD 120 million for Avanse and USD 144 million for Credit Saison. Additionally, Perfios emerged as a new unicorn in H1 2024, exemplifying the potential for high-growth companies within the Indian fintech landscape.
Regional And Investor Insights
Bangalore led the charge in total funds raised, followed by Mumbai and Pune, underscoring these cities as hubs of Fintech innovation and investment. Peak XV Partners, Y Combinator and LetsVenture were among the top investors, playing a crucial role in driving the sector's growth despite the challenging environment.
The first half of 2024 also saw an increase in exit activity, with six acquisitions and five initial public offerings (IPOs), compared to the previous year. This trend suggests a maturation of the Fintech ecosystem, providing successful exit opportunities for investors and entrepreneurs alike.
