Decline of Fintech Funding in India: Reasons and Analysis

Graphical representation of decline in financial funding
Sarthak Shingre January 31, 2024

Decline of Fintech Funding in India: Reasons and Analysis

While all countries are running in the race of increasing their fintech footprint in the current times, a surprising situation has come upon India. Inspite of having a globally higher ranking in fintech investments, India has seen a setback in fundings for fintech startups in the year 2023. Remember the days when “Financial technology” was the hottest buzzword in India? Startups were popping up promising to revolutionize everything from payments to loans. All fueled by investors but fintech companies hit a decline of 63% in investments as compared to the past year. This means fintech funding went from 8.4 billion dollars in 2021, to only 2 billion dollars. 

Investors like Peak XV Partners, Y Combinator, and LetsVenture took majority of the initiative of funding fintech companies last year. The segments that led the Indian FinTech sector were Alternative Lending, Payments, and BankingTech. According to Business Standard, fintech sector’s growth has ranked it as the fourth highest-funded startup ecosystem in the global fintech sector, based on current cumulative funding. But what caused this sudden chill in the air?

Reasons for the dip in the fintech fund pool: 

The world economy is experiencing a rough patch. Investors are tightening their belts and becoming more selective about where they put their money. Increasing borrowing costs and macroeconomic conditions, alongside the pandemic caused the Indian investors to take lesser risks and challenge. Investors are now looking for startups with strong business models, clear paths to profitability, and solid teams. The days of “growth at all costs” are fading, replaced by a focus on sustainability and efficiency. Emerging areas like embedded finance and blockchain are attracting investor interest. These niche areas offer exciting possibilities for growth and disruption, even in a cautious market. 

Another reason for the decline in funding could be the promising but new territory of Blockchain Technology. Since the practical implementation of this tech is still limited, Investors could be hesitant in sharing their money for an unknown segment of fintech. 

The big metros have had their fill of fintech, but the vast untapped potential lies in smaller towns and rural areas. Fintech startups are shifting focus towards these regions, making financial services accessible to a wider population. Indian government has recently committed to the BharatNet project to improve broadband connectivity in rural areas. This initiative is expected to broaden fintech’s reach towards Tier-II and Tier-III Cities. So, the decline in fintech funding might be a pause, not a stop. The future is still bright, but it will require adaptation of new ideas and trust building with investors. 

If you’re interested in exploring more about the exciting developments in FinTech, check out for additional insights and opportunities.