Where does Indian FinTech funding stand globally?

By Puja Sharma

As Indian FinTech grows, it will be benchmarked for its speed of innovation, customer inclusion, and growth in the global financial services market. A significant contribution of the FinTech industry to the Indian economy, it also plays a significant role in providing full-blown financial services to all Indians, with an annual transaction value of more than $800 billion. This segment is crucial for the $5 trillion Indian economy, a report by Boston consulting group and Matrix Partners India highlighted.

Some FinTechs have closed, but a sizeable number have survived and proven their “immunity” to adverse events. Funding inflows went through a plunge of nearly 40-50% when COVID hit, driven by weaker Foreign investor funding, but the rebound post that (70-80%+) has given some runway to FinTechs.

The FinTech industry in India expanded by 20% over the previous year, compared to the USA, UK, and China, which expanded by 16%, 15%, and 10%, respectively. Having 7,460 FinTech companies, India now ranks third in the world behind the US (22,290) and China (8,870).

A total of 23 unicorns have been identified out of 106 in the India FinTech ecosystem, and this ecosystem is now capable of competing successfully in the international financial services industry and setting standards for innovation pace, consumer inclusion, and growth.

As ‘funding winter’ comes, FinTechs will need to re-evaluate their financials and enable cost controls as needed, to be able to continue innovative investments and scale the survey with 125+ Founders/CXOs of top FinTechs and Incumbents revealed that product expansion, ARPU, and monetization are the key priorities and biggest challenges for the industry today.

More than 70% of respondents believe most FinTechs may not be profitable in the next 2-3 years. While the scale is an important driver of profitability, early-stage focus on ‘unit economics’ is a critical orientation needed. With the race for customer acquisition and surging funding over the last 5 years, profitability and compliance have been an afterthought for many players.

While from a global perspective, IBS Intelligence recently reported, Investment in British FinTech firms in H1 of 2022 increased by just 24% YoY, compared to the stellar 207% growth in the same period last year, despite the global slowdown in funding. These findings showed that the UK FinTech sector has experienced growth to $9.1 billion in the first half of the year.

The only nation to receive more FinTech investment than the UK, raising $25 billion in the capital in the first half of the year, was the US. This comes amidst trends of high-growth tech firms swerving a London IPO in favor of listing on the New York Stock Exchange. The London Stock Exchange (LSE) is backing a new review looking into the rise and fall in funding and valuations in the industry over the last few years.

As the industry matures and regulatory controls strengthen, “Fin” in FinTech will become big and bold. As we move ahead, there are a few key imperatives for our FinTech founders—

Key takeaways

• “Fin” as important as “Tech” – While customer acquisition and growth are important, a deeper understanding of banking revenue pools and designing for profitable operations from the get-go will be critical to success.
• As Indian FinTech grows, it will be benchmarked for its speed of innovation, customer inclusion, and growth in the global financial services market.
• Some FinTechs have closed, but a sizeable number have survived and proven their “immunity” to adverse events.
• The FinTech industry in India expanded by 20% over the previous year, compared to the USA, UK, and China, which expanded by 16%, 15%, and 10%, respectively
• Around 70% of respondents believe most FinTechs may not be profitable in the next 2-3 years.