India's fintech funding declines 63% in 2023: Here's why
The Indian fintech industry saw a significant decrease in funding in 2023, with a 63% drop compared to the previous year. Early-stage investments were hit the hardest, as reported by market intelligence platform Tracxn. Fintech start-ups raised a total of $2 billion in 2023, a sharp decline from $5.4 billion in 2022 and $8.4 billion in 2021. The report suggests that increased borrowing costs, macroeconomic conditions, and a cautious approach by investors contributed to this downturn.
Factors behind the funding decline and top performers
Tracxn's report emphasizes that investors are now more thorough in their due diligence before making investment decisions. Late-stage funding rounds in 2023 fell by 56% to $1.4 billion, while early-stage and seed-stage rounds dropped by 73% and 69%, respectively. A total of 144 funding rounds occurred in the past year, compared to 504 in 2022. Zepto and InCred were the only fintech companies to achieve unicorn status in 2023, as opposed to five new unicorns in the sector in 2022.
Government initiatives and M&A activity in the fintech space
Despite the decline in funding, India's fintech ecosystem maintained its global ranking as the third-largest recipient of funding in 2023. The government has allocated approximately $16.7 billion to the BharatNet project, aimed at expanding broadband connectivity in rural areas, which could potentially boost investments in the sector. Merger and acquisition activity remained steady, with 31 acquisitions in 2023, including notable deals such as TrillionLoans (BharatPe), Goals101 (M2P), and Upwards (LendingKart).
