Indian fintech funding slumps nearly two third in 2023: Will India emerge as ‘global fintech powerhouse’?

The FinTech sector in India has witnessed a downward trend as it received funding of $2 billion in 2023, a decline of around 63% and 73% compared to previous years, according to a report by data intelligence platform Tracxn. The financial technology sector has raised $5.4 billion in 2022 and $8.4 billion in 2021.

However, India ranked third globally in terms of FinTech startup funding last year, strengthening its position as a significant player on the global stage, despite the challenges posed by factors including increasing borrowing costs and macroeconomic conditions, among others. Alternative Lending, Payments, and BankingTech were the top performing segments in the Indian FinTech sector, while the Peak XV Partners, Y Combinator, and LetsVenture were the top investors in the space.

Speaking about the report, Tracxn cofounder Neha Singh said, “Despite a 63% decline, our sector stands strong as the third highest funded ecosystem globally. The implementation of regulatory measures and the government's commitment to digitalization have set the stage for a promising future." Last year, the late stage rounds secured $1.4 billion in funding, reflecting a 56% drop compared to the $3.2 billion raised in 2022, while the early stage rounds faced a similar trend, with funding plummeting to $489 million, marking a stark 73% decline from the $1.8 billion raised in 2022.

Seed stage rounds were also not immune to this downward trajectory, securing $145 million, a 69% drop compared to the $474 million raised in the preceding year, the Tracxn report added. Bengaluru emerged as the leader in total FinTech funding raised in 2023, followed by Mumbai and Jaipur. Also, there are only two companies ‘Zaggle’ and ‘Veefin’ that announced IPOs in 2023 as compared to five in 2022.

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