Fintech Funding Dips As Investors Turn Cautious Amid Geopolitical Tensions

As geopolitical crisis intensifies across the globe along with macro-economic concerns, fintech funding has declined as Investors turned cautious, according to Tracxn Geo report. It added that the Indian fintech startup ecosystem witnessed its peak funding in Q4 2021 securing USD 2.95 billion in total funding, after which it started to decline.

The report stated that fintech acquisitions in India declined, with only four acquisitions in Q3 2024, marking a 50 per cent drop from the eight recorded in Q3 2023. Notably, payment solution company Ijeeva was acquired by FinFusion Solutions during this period.

According to the report, India ranks 4th in all-time funding for the fintech sector, following the United States, China, and the United Kingdom. However, in Q3 2024, India surged to second place in funding, reflecting significant recent growth in the sector. 

This growth can be credited to government initiatives such as the promotion of digital payments through UPI, with over 14 billion transactions processed in May 2024, the JAM Trinity initiative integrating Aadhaar with bank accounts and mobile numbers, and the allocation of Rs 2,600 crore in incentives to support fintech startups.

Neha Singh, Co-founder, Tracxn said "The resurgence in funding for the Indian fintech industry signifies a pivotal moment in our journey towards becoming a global fintech hub. With rising digital adoption and supportive government policies, we are positioned for sustained growth. Our report highlights not just funding numbers but the enduring potential of Indian startups to redefine the future of finance."

The Indian fintech ecosystem continues to show resilience and growth in Q3 2024. The quarter saw one company secure a $100M+ funding round, mirroring the same trend from Q3 2023. DMI Finance, a leading provider of consumer and SME loans, raised an impressive USD 334 million in Q3 2024, it added.

The top-performing sectors in Q3 2024 included alternative lending, investment tech, and payments. The Alternative Lending segment raised USD 517 million, a 49 per cent increase from USD 348M in Q3 2023 and a remarkable 199 per cent growth from USD 173 million in Q2 2024. Investment tech secured USD 109 million in Q3 2024, reflecting a 58 per cent decline from USD 257 million in Q3 2023, but a significant 356 million surge from USD 23.9M in Q2 2024.

In Q3 2024, the Payments segment in India's FinTech ecosystem secured a total of USD 93 million in funding. However, some sectors lagged behind, with RegTech and Insurance IT emerging as the least-performing sectors this quarter. Notably, the regtech segment saw no funding in Q3 2024, a stark contrast to the USD 238 million raised in Q3 2023. Insurance IT also experienced a significant downturn, securing only USD 163K in Q3 2024 compared to USD 230 million in the same period last year, reflecting a nearly 100 per cent drop.

Despite these challenges, the Indian fintech ecosystem saw positive milestones. In September 2024, lending management platform Moneyview achieved unicorn status, marking one of the major successes of the quarter. Additionally, two companies went public in Q3 2024, slightly down from the three IPOs in Q3 2023.

Peak XV Partners, Y Combinator, and Lets Venture emerged as the top investors in India's fintech space overall. At the seed stage, Antler, Blume Ventures, and Venture Catalysts led the way as the most active investors in Q3 2024. For Early-stage investments, Elevation Capital, Accel, and Lightspeed Venture Partners stood out as the leading backers of emerging FinTech startups during the quarter, it mentioned.