Indian Fintech Funding & Acquisition Report 2022-23
Did 2022 really witness a funding winter or did investments simply fail to meet sky high expectations set by 2021?
Fintech Funding in India was widely discussed and debated throughout 2022. With late stage funding witnessing sporadic traction, the entire ecosystem simultaneously branded the situation as the ‘Funding Winter’. This may seem like an apt reaction, especially after last year’s electric funding scene, with headlines frequently announcing rounds going into the hundred millions that sent valuations soaring into the billions. In fact, 14 entities attained the coveted unicorn status in 2021, as compared to only 5 in 2022.
2022 BELONGED TO THE NEW ENTRANTS
2022 numbers paint an entirely different picture for newer entrants. It seems as if it was the year for the underdogs, with investors taking their gaze away from the ecosystem giants to analyse the potential of up-and-coming startups. Everyone found it challenging to come to terms with the investment in 2022 after witnessing USD 7 billion pouring in during
2021. However, it was a remarkable year considering that the run rate before then was less than / equal to 50% of funding in 2021. In fact, the summation of the monies that the industry witnessed during the years 2018 – 2020 were similar to funding in only 2022.
The sum of the total funding during 2018 – 2020 is similar to the overall funding in 2022
FUNDING ANALYSIS: 2021 VS 2022
LENDING witnessed the highest amount of funding, with 94 entities receiving USD 2 B, which is a significant jump from 2021, where 71 entities received USD 1.3 B. However, we can expect these numbers to stagnate in 2023 due to the evolving regulatory environment in digital lending.
PAYMENTS seems to have reached its Maturity Phase, with only 40 startups drawing USD 1.3 B, a decrease of more than 50% compared to 2021 funding. Many paytechs are now pivoting to Lending and Wealth, which is a logical next step due to the low revenues that payments entails by the nature of the business. By starting in this segment, entities are able to build a network with customers, which they then leverage and build other business models upon. Innovation in payments may have plateaued, but we must now await the diversified products and services that they will offer.
OPEN BANKING has seen significantly less traction, with almost 70% less investment in 2022. A few proven players drew in a large chunk of the pie, i.e. Niyo (USD 130M), Fi (USD 71M), Open (USD 50M) and Jai Kisan (USD 50M). The number of startups funded however, was marginally higher than 2021, with overall 31 startups receiving USD 418 M. These may proceed to drive innovative open banking use cases with a focus on MSMEs or even Corporates.
WEALTHTECH saw 135% more startups receiving funding, though the ticket sizes were smaller than in 2021. The segment has witnessed massive innovation, with use cases like Robo Advisors, Micro Investment, Social Trading, Alternative Investments and Save Now Pay Later flooding the market and democratising a previously closed ecosystem.
INSURTECH ecosystem is now at a growth stage, with three entities receiving funding of more than USD 100M (Digit Insurance, Turtlemint and InsuranceDekho). Overall, 21 entities received
investment of USD 530 M, and this can be expected to grow significantly in 2023. The regulatory landscape has also been very positive for the segment, with IRDAI pushing for various transformational decisions such as the formation of Bima Sugam, the onboarding of Insurance companies on the Account Aggregator and the use of Telematics for Motor Insurance.
ENABLERS received funding of USD 431 M, which will drive growth of the entire ecosystem by easing digitization for traditional financial institutions as well as the process of launching new products and services.
For an in-depth analysis of funding and acquisition news and its impact on the ecosystem download our report.