The fintech sector recorded funding of $795 million in 2024, a decline of 11 per cent and 59 per cent compared to $896.7 million raised in H2 of 2023 and $1.93 billion in H1 of 2023, respectively, according to report by market intelligence platform Tracxn.
However, fintech ecosystem achieved a significant milestone in H1 2024, ranking among the top three funded globally alongside the US and UK. Despite this achievement, the sector has faced substantial funding challenges.
This decline reflects global trends influenced by the ongoing funding winter and geopolitical uncertainties, despite the robust performance of the Indian economy, which registered an 8.2 per cent GDP growth rate for FY24 and is projected to maintain a 7.2 per cent rate in FY25.
Only two $100 million+ funding rounds have taken place in 2024. Perfios was the only unicorn created in 2024, while it saw 6 acquisitions and 5 IPOs.
Bengaluru led the funding in the Indian FinTech space, followed by Mumbai and Pune. Peak XV Partners, Y Combinator, and LetsVenture emerged as the leading investors in the sector.
Funding in different stages
The report noted that the fintech funding saw a substantial downturn in 2024 as late-stage funding in the first half (H1) of 2024 at $551 million, recording a decline of 63 per cent from $1.5 billion in H1 2023. It stood at $436 million in second half of 2023.
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While, early-stage rounds recorded funding worth $179 million, marking a decline of 55 per cent from $401 million in H2 2023 and 50 per cent from $361 million in H1 2023.
The report noted that seed-stage funding amounted to $65 million, a 7.4 per cent rise from $60.5million in H2 2023 but a 43 per cent reduction from $114 million in H1 2023.
While, the quarterly analysis reveals that Q1 2024 contributed $582 million to the total funding, representing a 55.6 per cent drop from $1.31 billion in Q1 2023. While, Q2 2024 saw only $214 million in funding, a 65 per cent decrease from the same period last year.
Two funding rounds of over $100 million were recorded in H1 2024, compared to just one in H2 2023. Noteworthy rounds included Avanse’s $120 million Series C and Credit Saison’s $144 million Series D, underscoring continued interest in key players despite overall funding declines.
Segment performers
Alternative Lending, RegTech, and BankingTech were the top-performing segments in the Indian FinTech sector.
Alternative Lending segment secured $646 million, which, despite being a 17.4 per cent increase from H2 2023, marked a 27 per cent fall from H1 2023. This segment alone accounted for 81 per cent of the total funding in the Indian FinTech space, driven by digital lending solutions that enhance financial inclusion across the country.
The RegTech sector saw a 50 per cent drop in funding, accumulating $118 million compared to H2 2023’s $238 million, while Banking Tech received $115 million, down 65 per cent from $328 million in H2 2023 but up 118 per cent from $52.8 million in the same period last year.
Speaking on the launch of the report, Neha Singh, Co-Founder at Tracxn, said, “Despite the global funding slowdown, India’s FinTech ecosystem shows agility and adaptability, supported by robust economic fundamentals. The slowdown in funding reflects the need for a cautious outlook and strategic planning among startups and investors. Our FinTech sector remains dynamic, and we are optimistic that a supportive policy environment and technological advancements will create new opportunities for growth and innovation in the near future.”
Perfios emerged as the only unicorn in H1 2024, with no unicorns in the same period in 2023.
Acquisition activity saw a steep decline, with only six acquisitions, a 66% decline compared to 18 in H1 2023. Significant deals included PureSoftware, a provider of BPO services for financial, healthcare & other sectors, acquired by Happiest Minds for $94.5 million, and ET Money, a mutual fund investment platform, acquired by 360 One for $44 million.
Additionally, five companies went public in the first half of 2024, contrasting with no IPOs in the corresponding period last year.