Funding for Indian fintech startups witnessed a substantial decline of 45%, dropping to $6.3 billion in 2022 from $11.5 billion the previous year. This downturn can be attributed to various factors, including global economic challenges and the geopolitical tensions arising from the Russia-Ukraine conflict. The findings are outlined in the Fintech Report by IIFL, a financial services firm, highlighting a notable contrast to the record funding seen in 2021 across the Indian fintech and startup sectors.
Overall Startup Funding Decline
The decline in fintech funding contributed to an overall reduction in startup funding, which fell to $46.69 billion in 2022 from $74.5 billion in 2021.
Despite this setback, the Indian startup ecosystem is poised to witness another potentially record-breaking year for venture capital investments. Many ventures are securing private funding, particularly in the early-stage segment. While late-stage investors may exercise caution due to the global tech sector’s devaluation and apprehensions surrounding emerging domains like cryptocurrency and the metaverse, the early-stage segment is experiencing heightened activity and enthusiasm.
According to Mehekka Oberoi, a fund manager at IIFL, the Indian fintech industry has made significant strides since the mid-1990s when online banking services were first introduced. The widespread adoption of mobile phones and affordable internet access has led to widespread usage of payment apps and on-tap credit solutions among India’s masses. Fintech companies now offer comprehensive solutions, addressing the limitations of traditional financial services while innovating to deliver superior user experiences.
Projected Growth
The Indian fintech market is poised for rapid expansion in the coming years, with forecasts indicating a market size of $1.3 trillion by 2030.
Growth in Disbursement
The Indian fintech sector has demonstrated a willingness to adhere to guidelines set by the Reserve Bank of India (RBI), evident from the disbursement data for the third quarter of FY23 ending on December 31, 2022. According to data released by the Fintech Association for Consumer Empowerment (FACE), disbursements saw significant growth in both value and volume. Value-wise, disbursements surged by 118% year-on-year (Y-o-Y) and 2% sequentially, reaching ₹18,537 crore. Volume-wise, there was a remarkable 147% Y-o-Y growth and a 6% sequential increase.
