The Fintech sector in India experienced a significant decrease in funding in 2023, securing only $2 billion, a sharp decline of 63% and 76% from 2022 and 2021, respectively, according to a report by Tracxn.
In comparison, the sector raised $5.4 billion in 2022 and $8.4 billion in 2021. Despite these challenges, largely attributed to rising borrowing costs and tough macroeconomic conditions, India has emerged as one of the world’s top-funded countries in the fintech space.
India ranked third globally in fintech startup funding in 2023, solidifying its position as a major player on the global stage. The funding pattern across different stages of startup development also saw significant changes.
Late-stage rounds attracted $1.4 billion, a 56% decrease from the $3.2 billion raised in 2022. Early-stage funding dropped to $489 million, a 73% decline from the previous year’s $1.8 billion.
Seed-stage rounds were not spared, securing only $145 million, down 69% from the $474 million in the year before. Prominent investors in this sector included Peak XV Partners, Y Combinator, and LetsVenture.
Remarkably, India has also taken a lead in digital payments, surpassing the combined transactions of the top four leading countries. In 2022, India recorded an impressive 89.5 million transactions, with projections indicating that transaction numbers could reach a staggering $100 trillion by 2030 in India’s payments landscape.
The report highlighted that Alternative Lending, Payments, and Banking Tech were the top-performing segments within the fintech sector. Alternative Lending received $835 million in 2023, a decrease from $2.28 billion in 2022. The Buy Now, Pay Later (BNPL) segment experienced significant growth due to its increasing adoption in the country.
The digital lending space is expected to grow, bolstered by the Indian government’s recent launch of the Digital Personal Data Protection Act, which aims to enhance transparency and customer trust in the sector.
Banking Tech, another key sector, secured funding of $331 million in 2023. This represents a substantial drop of over 50% from the $671 million funding received in 2022. The sector has benefited from digitalization trends, with digital banking gaining popularity in both urban and rural areas, largely driven by increased internet usage and mobile device accessibility.