Indian fintech funding witnessed a decline of 63% in 2023: Report

Funding in the fintech space has been experiencing a downward trend in India as well as on a global scale. The fintech sector received funding of $2 billion in 2023, a decline of 63 per cent and 76 per cent, compared to the previous years — $5.4 billion raised in 2022 and $8.4 billion in 2021 — according to a Tracxn FinTech Report.

Late-stage rounds in 2023 secured $1.4 billion in funding, reflecting a 56 per cent drop, compared to the $3.2 billion raised in 2022. Early-stage rounds faced a similar trend, with funding plummeting to $489 million, marking a stark 73 per cent decline from the $1.8 billion raised in 2022. Seed-stage rounds were also not immune to this downward trajectory, securing $145 million, a 69 per cent drop, compared to the $474 million raised in the preceding year.

top investors

Peak XV Partners, Y Combinator, and LetsVenture were the top investors in the space. The year witnessed five funding rounds surpassing the $100 million mark, showing pockets of resilience in the sector.

Two companies, Zaggle and Veefin, announced IPOs in 2023, compared to five companies that went public in 2022. Bengaluru emerged as the leader in total fintech funding raised in 2023, followed by Mumbai and Jaipur, reaffirming the significance of these as fintech hubs in India’s start-up landscape.

Neha Singh, co-founder at Tracxn, said: “In the dynamic world of fintech, India’s resilience shines through the funding challenges of 2023. Despite a 63 per cent decline, our sector stands strong as the third-highest funded ecosystem globally, affirming its position as a hub of innovation. The implementation of regulatory measures and the government’s commitment to digitalisation have set the stage for a promising future.”

Despite the challenges posed by factors, including increasing borrowing costs and macroeconomic conditions, India has become one of the world’s top-funded countries. According to the report, India ranked third globally in 2023 in terms of fintech start-up funding, strengthening its position as a significant player on the global stage.

India has topped the list for digital payments and recorded transactions higher than the top 4 leading countries combined, recording 89.5 million transactions in 2022, with experts predicting the payments landscape in India to reach $100 trillion in transaction numbers by 2030.

The report anticipates that the sector will witness long-term significant growth owing to factors such as the young tech-savvy population, a larger consumer base, its dependency on informal financial and commercial systems, and multiple initiatives by the government towards digitalisation.