Indian FinTech companies are likely to see moderate funding during 2024, with a focus on specific sectors and strategic investments.
Overall, fintech funding in 2024 is expected to exceed 2023 levels as the market recovers from the pandemic and regulatory uncertainties. The acceleration of fintech innovation and adoption further contributes to this optimistic outlook.
While uncertainties about sustainability persist, platforms moving towards profitability are expected to attract a significant share of funding. Investors are likely to prefer fintech models showing rapid growth, with an emphasis on super-apps and platform games known for scalability and revenue generation.
Digital lending, a consistent focus area for investment, is expected to maintain a strong position due to its resilience and ongoing revenue models. Digital lending companies with strong banking partnerships and proven profitability, such as Indifi and Neogrowth, are expected to benefit.
Digital Non-Banking Financial Companies (NBFCs) and lending Software as a Service (SaaS) companies, innovative in risk assessment, are also likely to attract substantial investment interest.
Q3 thrust
Despite a general drop in funding in 2023, the fintech sector experienced an increase in Q3, with $442 million invested, mainly driven by lending technology.
Industry experts warn that while financial activity may improve compared to the previous year, it is unlikely to reach the peak witnessed in 2020 or 2021 when fintech emerged as one of the most highly funded sectors in India.
Anticipating a shift to quality over quantity and value over valuation, investors are expected to adopt a more selective approach in 2024. Fintech segments demonstrating resilience and potential, including embedded finance, digital assets, AI-powered advisory and asset management, generative AI, and blockchain integration , are poised to attract increased funding.
Niche areas
The landscape also suggests a focus on markets with high demand and opportunity, such as cross-border financial solutions, full development, RegTech and compliance, financial inclusion and literacy, and the convergence of FinTech and HealthTech.
However, the experts warn that the formation of new unicorns could be fewer this time, indicating a maturing and realistic market. Early stage startups are expected to gain momentum as they find their product market fit and niche.