India's fintech space among top 3 globally despite 59% dip in H1 funding

India’s fintech sector received a total funding of $795 million in H1 2024, reflecting an 11% decrease from the $896.7 million raised in H2 2023 and a substantial 59% decline compared to $1.93 billion garnered in H1 2023, according to data shared by market intelligence firm Tracxn.

Despite a significant fall in funding this year, India’s fintech space was among the top three ecosystems, including the US and the UK.

The factors attributed to the decline are global trends influenced by the ongoing funding winter and geopolitical uncertainties. The low funding in the fintech space comes despite the robust performance of the Indian economy, which registered an 8.2% GDP growth rate for FY24 and is projected to maintain a 7.2% rate in FY25.

Witnessing a substantial downturn in 2024, India’s fintech funding landscape saw late-stage funding at $551 million, a 26% increase from $436 million in H2 2023 but a 63% decrease from $1.5 billion in H1 2023.

The early-stage rounds recorded $179 million in funding, a significant decline of 55% from $401 million in H2 2023 and 50% from $361 million in H1 2023. Seed-stage funding amounted to $65 million, a 7.4% rise from $60.5 million in H2 2023 but a 43% reduction from $114 million in H1 2023.

Quarterly analysis reveals that Q1 2024 contributed $582 million to the total funding, representing a 55.6% drop from $1.31 billion in Q1 2023. Q2 2024 saw only $214 million in funding, a 65% decrease from the same period last year.

Two funding rounds of over $100 million were recorded in H1 2024, compared to just one in H2 2023. Noteworthy rounds included Avanse’s $120 million Series C and Credit Saison’s $144 million Series D funding, underscoring continued interest in key players despite overall funding declines.

Alternative lending, regtech, and bankingtech were the top-performing segments in the Indian fintech sector. The alternative lending segment secured $646 million, which, despite being a 17.4% increase from H2 2023, marked a 27% fall from H1 2023. This segment alone accounted for 81% of the total funding in the fintech space.

The regtech saw a 50% drop in funding, accumulating $118 million compared to H2 2023’s $238 million, while banking tech received $115 million, down 65% from $328 million in H2 2023 but up 118% from $52.8 million in the same period last year.

Neha Singh, co-founder at Tracxn, says despite the global funding slowdown, India's FinTech ecosystem shows agility and adaptability, supported by robust economic fundamentals. “The slowdown in funding reflects the need for a cautious outlook and strategic planning among startups and investors.”

Peak XV Partners, Y Combinator, and LetsVenture were the all-time top investors in the space. Perfios emerged as the only unicorn in H1 2024, with no unicorns in the same period in 2023. Acquisition activity also saw a steep decline, with only six acquisitions, a 66% decline compared to 18 in H1 2023.

Significant deals included PureSoftware, a provider of BPO services for financial, healthcare & other sectors, acquired by Happiest Minds for $94.5Mn, and ET Money, a mutual fund investment platform, acquired by 360 One for $44 million. Additionally, five companies went public in the first half of 2024, contrasting with no IPOs in the corresponding period last year. Bengaluru emerged as the leader in total FinTech funding raised in 2024, followed by Mumbai and Pune.