 "India's fintech sector sees five quarter low in VC investments")
Digital payment technologies are being lauded as the “next big thing” in India’s internet ecosystem, but investment in the sector fell to a five-quarter low with just nine venture-backed firms closing deals in the three months that ended September.
While investments in the space fell to $127 million in the third quarter, down from $157 million from the previous quarter, the outlook for the sector remains strong. “India-based investment declines as investors focus on higher-quality deals,” reads a joint report by KPMG and CB Insights on the Fintech sector.
The three largest deals in Fintech closed in the September quarter account for $112.3 million of the total $127 million, led by Paytm ($60 million), Mobikwik ($40 million) and Sirion Labs ($12.3 million). The total number of deals dropped to nine from fifteen in the previous quarter.
“Unlike in other parts of the world, investment in lending solutions is still going strong in India. A number of fintechs are now partnering with banks, either acting as lead generation for them or offering “white label” platforms so that banks can provide their own services,” said Neha Punater, Head of Fintech, KPMG in India.
According to the report, one of the largest drivers of the growth of Fintech in India has been the government. With initiatives such as the Unified Payment Interface (UPI) that looks to tie in all digital payments — credit/debit card, digital wallets and net banking — India is the first country to roll out such a system at such a vast scale.
Moreover, partnering of banks that lack the latest in payment technologies and start-ups that are building new innovative ways to transact at ever lower costs is also driving growth. Advisory, lead generation and mobile wallet services are attracting the maximum investments due to such partnerships.
The three largest players in India’s Fintech space are seeing gross transaction values in multiple billions of dollars. Paytm, the largest digital payments company in the country, said earlier this week that it hit a gross merchandise value of $5 billion four months ahead of its intended target. Snapdeal-owned Freecharge said its digital payments arm will contribute $1 billion to its gross sales.
With over 250 million and growing smartphones in the country, more people are expected to pay digitally to buy goods both online and offline. For instance, in the days following the Narendra Modi government’s announcement to scrap high currency notes, digital wallets such as Paytm, Freecharge, Mobikwik and Ola Money saw the amount of money being stored with them multiply by several factors.
“The Indian Fintech sector is going to witness a renewed interest in payments in wake of the demonetisation measures viewed last week. We have seen many banks and financial institutions exploring potential POC and partnerships with Fintech in areas beyond retail banking,” added Punater.
