Bengaluru, India, July 24, 2023: Funding into FinTech startups in India plunges 67% in H1 2023, reveals Tracxn’s FinTech – India Semi Annual Funding Report – H1 2023. The report, which is based on Tracxn’s extensive database, provides insights into the Indian FinTech space.
India has retained its position as the third-highest funded FinTech industry in H1 2023, after the US and UK, similar to the previous year. India is also the third-largest FinTech ecosystem in terms of number of companies next to the US and UK. The number of FinTech companies in India is twice more than China and Canada. FinTech startups in India have received the highest funding compared with any other sector in the country.
Indian FinTech Startups raised a total of $1.4 billion in H1 2023, a massive drop of 67% from $4.3 billion raised in H1 2022. However, the funds raised in the first six months of 2023 dipped only 6% from $1.5 billion in H2 2022.
This funding decline in H1 2023 is largely due to the downward trend in early-stage investments, which plunged 81% and 68% from H1 2022 and H2 2022, respectively. Seed-stage funding in H1 2023, too, saw a decrease of 38% and 70% from H2 2022 and H1 2022, respectively. Late-funding in the first half of 2023 grew 66% from H2 2022, but fell 62% from the same period last year.
The FinTech startup ecosystem raised funds worth $1.18 billion in Q1 2023, contributing to more than 84% of the funds raised in the first half of 2023 The funds raised in the first three months of this year is also 2X higher than the funds raised in the previous quarter (Q4 2022). Meanwhile, Q2 2023 was the least funded quarter since 2021.
Payment, Alternative lending and Internet-first Insurance platforms were the top-performing segments in the Indian FinTech sector in H1 2023. Payment startups accounted for 55% of the total funding received in the FinTech sector in the first six months of 2023. Funding in the payments segment has increased by 3X compared with H2 2022. Funding in payment startups is witnessing growth on a global scale, and was the highest performing segment in the US FinTech space as well.
The Indian FinTech space witnessed seven $100 million+ rounds in the first six months of 2023. No new unicorns were recorded during this period, compared with four in H1 2022.
There were no new IPOs in this sector in H1 2023, as against two each in H2 2022 and H1 2022. There was a slight uptick in the number of acquisitions, which rose to 19 in H1 2023 from 13 in the second half of 2022, but still lower than 26 in H1 2022.
Peak XV Partners, AngelList, and Y Combinator were the top investors in the Indian FinTech space. IPV, Blume and Titan Capital were the top investors in seed stage rounds, while Elevar Equity, TPG and Peak XV Partners were the top investors in early stage rounds. OP Finnfund Global Impact Fund I and Avataar Ventures were the top investors in late stage rounds.
Among Indian cities, FinTech startups in Bengaluru raised $949 million in H1 2023, 2.5x higher than the next two cities on the list – Mumbai ($218 million) and Jaipur ($150 million). The companies based on Bengaluru accounted for 67% of the funds raised in the Indian FinTech segment in the first half of 2023.
Despite being the third largest FinTech ecosystem on a global scale, the Indian Fintech startup ecosystem has been witnessing a funding drop similar to the global trends and H1 2023 has been the least funded half year since 2021.
However, the increased investor interest in FinTech startups in this region can be attributed to the higher adoption rate of FinTech solutions in India, compared with the global average. Multiple initiatives by the government, like the introduction of UPI, ease of banking policies, introduction of India’s Digital Rupee are accelerating the growth in this segment.
Tracxn Technologies Ltd. is a data intelligence platform for private market research, tracking 1.8 million entities through 1800+ feeds categorised across industries, sub-sectors, geographies and networks globally