Indian fintech funding declines 63%; raises total $2 bn: Tracxn Report 2023

Financial technology (fintech) startups in India collectively raised $2 billion in funding during the year 2023, a 63 per cent decline from the previous year's figure of $5.4 billion, based on data from the Tracxn, according to a report by the Financial Express (FE). This dip mirrors a broader trend of reduced funding across various sectors, with fintechs experiencing a significant slowdown compared to the peak of the funding boom in 2021, when they amassed a staggering $8.4 billion.

Despite the decline, the Indian fintech sector has retained its position as the third-highest funded globally in 2023. The sector's substantial growth and traction have also ranked it as the fourth highest-funded startup ecosystem in the global fintech sector, based on cumulative funding to date.

 

Decline in funding rounds for fintech firms in 2023

Last year witnessed a considerable drop in the number of funding rounds for fintechs, with only 144 rounds compared to the 504 seen in 2022. Among the standout segments within fintech, alternative lending, payments, and banking tech emerged as top performers. Alternative lending firms secured the highest funding within the sector, amounting to $835 million in 2023.

The decline in funding rounds was observed more among early-stage and seed-stage funding, as opposed to late-stage rounds. Late-stage rounds witnessed a 56 per cent drop to $1.4 billion, while early-stage rounds fell by 73 per cent to $489 million, and seed-stage rounds saw a 69 per cent decline to $145 million.

Payment startups lead funding in 2023

Payments startups secured $753 million in funding in 2023, while those focusing on banking tech services raised $331 million from investors. Both segments experienced a significant decrease in funding compared to the levels seen in 2022.

Only five funding rounds exceeding $100 million were recorded among fintechs in 2023, featuring PhonePe, Perfios, InsuranceDekho, KreditBee, and Mintifi. PhonePe led with the largest round of $623 million, followed by Perfios at $229 million and InsuranceDekho at $150 million.

One unicorn and two fintech IPO launches in 2023

Only one startup, InCred, emerged as a unicorn in the fintech space in India during the calendar year, compared to five in 2022. Two fintechs, Zaggle and Veefin, launched their initial public offerings (IPOs) during the year, compared to five in the previous year.

Among cities, Bengaluru led in fintech funding in India, followed by Mumbai, and Jaipur. Top investors were Peak XV Partners (formerly Sequoia Capital India), Y Combinator, and LetsVenture.