Fintech funding in Jan-March down 57% year on year, but up 59% from last quarter

Funding among Indian fintech startups has dropped 57% year on year to $551 million in the first three months of 2024, compared to $1.3 billion raised in the same period last year, according to the Fintech India report released by data intelligence platform Tracxn on Friday.

However, despite the year-on-year decline, there was a 59% rise in fintech funding from the previous quarter (October to December 2023).

Funding during the January-March quarter dried up year on year across stages, with seed stage down 77% to $9.9 million, early stage down 42% to $147 million and late stage falling 60% to $394 million, compared to the previous year. On a quarterly basis though, funding improved.

Further, the report noted that sectors including alternative lending, regtech, and banking tech emerged as top performers in Q1 2024. Alternative lending received $491 million in funding, accounting for almost 89% of the total funding witnessed in the fintech space.

It marked a growth of 290% compared to the $126 million raised in the December quarter of last year. Regtech followed this with $107 million, while banking tech received $85.8 million.

Some of the large rounds in fintechs were reported in lending company Avanse, B2B banking SaaS entity Perfios, regulatory tech startup IDfy and payments startup Mswipe.

The report comes at a time when the Indian fintech ecosystem has been facing increased scrutiny and regulatory changes from the Reserve Bank of India. This has made venture investors wary of investing in highly disruptive startups, rather preferring to go with those which operate in the business-to-business space or are regulated.

While seed-stage investments were led by Saison Capital, Hem Angels, and Capital A, early-stage investments saw participation from Peak XV Partners and RTP Global. Late-stage investments saw active participation from Elev8, Epiq Capital Advisors, and UC-RNT Fund.

Notably, Perfios emerged as the sole unicorn from the Indian fintech startup scene in Q1 2024, with only two IPOs coming from Medi Assist and IBL Finance. The quarter also saw four acquisitions, down from seven in Q4 2023, with Difenz, a fraud risk management platform, being acquired by Signzy for $5 million.

Fintech unicorn Cred and payment aggregator Juspay are the other two startups which closed acquisition deals in the first quarter. DMI Finance, a non-banking finance company, acquired ZestMoney in January this year.