The fintech sector in India recorded a 68 per cent surge in funding in the July-September (Q3) period of calendar year 2023, compared to the year-ago period, according to the market intelligence platform Tracxn.
The fintech landscape, which witnessed a gradual decline after it experienced a surge in Q4 CY2021, experienced an upswing in Q3 2023, noted the report, titled ‘Geo Quarterly India FinTech Report- Q3 2023’. According to the report, India ranked fourth globally in terms of fintech start-up funding.
The report noted that despite the challenges posed by factors like rising borrowing costs and recession in developed markets, the sector observed an uptick in funding.
Overall, India is the third largest start-up ecosystem globally, with nearly 1 lakh start-ups, behind the US and China. No new unicorns were created in Q3, while it saw 7 acquisitions and 2 IPOs.
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Bengaluru led the funding in the fintech space, followed by Mumbai and Noida, highlighted the report.
The report highlights that the sector which witnessed significant growth in specific segments with alternative lending, banking tech, and regtech emerging as top performers in H1 2023.
Alternative lending, in particular, clocked a growth of 259 per cent compared to Q2 2023, reaching $305 million in funding. The BNPL sector, which has seen significant growth and adoption within the country, contributed to the growth in this sector.
Banking tech received funding of $282 million in Q3 2023, which is a growth of 396 per cent compared to Q2 2023 and 81 per cent compared to Q3 2022.
According to the report, the banking tech space largely benefitted from the digital and widespread adoption of digital banking due to rising internet and mobile device penetration in cities and rural areas. The government of India’s recent allocation of $16.7 billion towards the BharatNet project to increase broadband connectivity within rural areas will help widen the reach and potentially bring about more investments into the sector.
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Regtech received funding of $229 million in Q3 2023, which is a growth of 100 per cent compared to Q2 2023. Payments, embedded finance and Internet-first insurance platforms saw a drop of 91 per cent, 99 per cent and 64 per cent, respectively, in Q3 compared to the funds raised in Q2 2023
The quarter also saw significant funding in late-stage rounds, with Perfios, a real-time credit-decision platform, securing a notable $229 million in a series D round led by Kedaara Capital.
“In a time of global economic uncertainty, India’s FinTech sector has demonstrated exceptional resilience and growth. Tracxn’s Q3 2023 report sheds light on a pivotal period, where our FinTech startups exhibited a remarkable 68% increase in funding compared to Q2 2023. This surge reflects the industry’s dynamism and innovation, positioning India as a leading global FinTech player,” said Neha Singh, Co-Founder, Tracxn.
The quarter saw seven acquisitions, a slight drop of 12 per cent from eight acquisitions in Q3 2022. This included Fego, an open banking platform, which was acquired by Perfios, Bridge2capital, a supply chain financing platform by IIFL Finance and FundsIndia, an investment platform for mutual funds, by WestBridge Capital. Two companies, Zaggle and Veefin went public in Q3 2023, the report added.