India’s Fintech M&A Count Hits 30 in 2023, Lending Sector Tops List

Lending Fintech companies accounted for 30% of all Fintech acquisitions in India in 2023, highlighting a shift in market dynamics amid growing regulatory pressures, a report from GrowthPal revealed.

This surge in acquisitions within the lending sector marks a departure from previous years, where the payments and Wealthtech sectors dominated merger and acquisition (M&A) activities.

The GrowthPal analysis, which focuses on data-driven deal sourcing, noted a total of 30 Fintech M&A transactions in India for the year, slightly down from 37 in 2022 and up from 29 in 2021.

Among the standout transactions were the acquisitions of Bridge2Capital by IIFL Finance, FinFort by Yubi, and ORO Wealth by InCred Capital.

However, the fintech industry has seen a significant downturn in the launch of new startups. In 2023, only 20 fintech startups were established in India, a stark reduction from 45 in 2022 and 73 in 2021, indicating a nearly 70% decrease from two years prior.

GrowthPal attributes this decline to the stringent regulatory and compliance environment that has emerged, posing challenges for new ventures in the fintech space.

Maneesh Bhandari, Founder and CEO of GrowthPal, stated that the Fintech sector’s growth has been hampered by the new regulatory landscape, despite the necessity of these measures for maintaining industry integrity.

The report also highlights the composition of the acquirers in 2023’s Fintech M&A landscape: 20 were large companies, six were mid-sized, and five were small entities.

The primary motives behind these acquisitions included product enhancement, client and market expansion, and geographical reach.

GrowthPal’s findings underscore the reliance of the fintech ecosystem on venture capital (VC) funding due to challenges in monetization.

Between Q3 2022 and Q3 2023, the global fintech sector raised $46 billion, a decrease from the $119 billion recorded between Q2 2021 and Q2 2022. This shift reflects a growing focus on operational efficiency and core business fundamentals.

Looking ahead, the report anticipates significant trends in 2024, such as the disruption of financial services by artificial intelligence (AI), the expansion of digital lending marketplaces through open banking and APIs, and the emphasis on sustainable solutions.

Regulatory technologies (Regtechs) employing AI and data analytics are also expected to play a crucial role in transforming the Fintech landscape by streamlining compliance processes and reducing operational costs.

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