The fintech industry in India has grown rapidly in recent years with total funding reaching $39 billion in 2022, said a report by IIFL Fintech. However, it maintained that the funding declined by 40 per cent in 2022 due to factors including the global economic slowdown and the war in Ukraine. In FY22, the sector saw a total of 476 deals. However, the Indian startup ecosystem is expected to see another record year in terms of the number of ventures receiving private capital, it said. “While big late-stage investors are staying on the sidelines due to the derating of the global tech sector and the caution of investors in new domains such as cryptocurrency and metaverse, the early-stage ecosystem is buzzing with activity,” IIFL Fintech report stated.
According to the data released by IIFL Fintech, India ranked third in terms of the number of fintech firms with a total of 9646 fintech companies, after the US with 31,950 companies and the UK with 12,787 firms.
The Indian fintech industry is expected to reach the $1 trillion mark in throughput and $200 billion in revenue by 2030, the report stated. The book size of Indian digital lending companies is set to grow from $38.2 billion in 2021 to nearly $515 billion by 2030, growing at a CAGR of 33.5 per cent. Meanwhile, the wealth-tech companies in the country are likely to grow from $20 billion in 2021 to $237.4 billion by 2030, at a CAGR of 31.6 per cent. The InsureTech sector is expected to be worth as much as $88 billion by 2030, growing at a CAGR of ~33.7 per cent. The Indian neo-banking sector, which recorded a five-fold increase in funding in 2021, is expected to be worth $215 billion by 2030.
The volume of PPI transactions has grown from 493.92 crore in FY21 to 658.12 crore in FY22 and 746.67 crore in FY23. The total value of PPI transactions rose to Rs 2.94 trillion in FY22 from Rs 1.98 trillion in FY21, before recording a dip to Rs 2.87 trillion in FY23.
Some of the leading fintech payment companies in India include Paytm, MobiKwik, Cred, PhonePe, Pine Labs, Razorpay, among others. The Indian fintech industry has successfully adapted to the RBI guidelines as disbursements grew 118 per cent on-year and 2 per cent sequentially to Rs 18,537 crore in the third quarter of FY23 in terms of value. In terms of volume, the growth was 147 per cent year-on-year and 6 per cent sequentially.
Funding trend
While the year 2022 saw a 40 per cent decline in funding in the sector due to the funding winter which is mostly about the amount of money being pumped into the system. When it comes to the number of startups being funded, the picture is quite different. According to the IIFL Fintech report, the number of startups that got funded remained flat for three straight years, from 2017 to 2019, only to pick up in 2020 and surging to an all-time high in 2021. While the year 2022 saw a steep decline in the number of funded startups, it was still at par to the pre Covid level. This suggests that actually more startups are being funded in the country despite the funding winter. However, the big cheques or late stage venture funding have reduced. The report stated that more than 60 percent of the total deals done in 2022 were in early stage (Seed to Series A), while the same was not more than 45 per cent in 2021.
In terms of average deal values, it was around $18-20 million for three straight years and shot up in 2020 and 2021, just to moderate around the third quarter of 2022 and then started climbing up in 2023 again.
The Indian startup ecosystem, the report stated, is set for another record year in terms of the number of ventures getting private capital. “Even though big late-stage investors are staying on the sidelines and not daring to jump in when the global tech sector has derated and some meltdowns within new domains such as cryptocurrency and metaverse have turned investors cautious about loosening their purse strings, the ecosystem is buzzing with activity at the early-stage level,” said Mehekka Oberoi, Fund Manager, IIFL.
