Fintech Funding in India
The month of January has seen total funding of $130 million*. A total of 16 startups in the fintech segment got funded in the month of January. This amount is a little lesser than that of December.
The payments segment received the largest amount of funding this month, accounting for over 50% of the total funding Value. In this segment, the highest funding was bagged by Kunal’s Shah’s credit card payments startup, Cred. The investors for Cred included DST Global, Sequoia Capital, Ribbit Capital, Tiger Global, General Catalyst, Sofina Capital, Coatue, and Times Internet’s Satyan.
The payments segment has been a hot favorite for the last five years in India especially after the introduction of UPI in 2016. Although payments in themselves do not provide a great source of profitability but their ability to attract customers to the platform is valued greatly. This customer base is then leveraged to cross-sell other products.
It should also be noted that India has one of the most advanced payment infrastructures in the world. India’s interoperability approach has emerged as greatly beneficial as it allows apps to scan and pay QR codes of different platforms.
Another key trend that has emerged in the recent past is that of embedded payments where the beneficiary merchant (think Uber, others) solely focuses on providing great service and user experience while the payments piece is abstract.
With the government of India allotting 1,500 Crs in to boost the structure of the digital payments, we expect both the payments and the embedded finance space to see more traction in the coming months.
Apart from Payments, the Wealthtech, Insurtech, and Lending segment also raised funds in January. But the amount of funds raised by the lending segment is much lower than what we have seen in the previous months. This could be due to the tightening of norms surrounding lending by the RBI.
The insurtech startup Digit Insurance also raised $18million in its latest funding round bringing its total valuation to $1.9billion. This has made Digit the first startup to enter the Unicorn club in 2021. This funding round was led by its existing investor Fairfax Holdings. Other investors like A91 Partners, TVS capital, and Faering Capital also took part in this round.
Apart from this, the B2B e-commerce platform Udaan also raised a massive amount of $280 million this month. This was raised from existing investors like Lightspeed Venture Partners, DST Global, and new investors like Octahedron Capital and Moonstone capital. This startup has been digitizing the highly fragmented and unorganized trade retail industry and in the last four years, it has emerged as one of the largest trade e-commerce platforms. Founded in 2016, Udaan is the first startup to reach unicorn status in a span of 4 years. While Udaan is not exactly a member of the Fintech segment, it is now entering into the lending space through SME lending.
We have not included this funding in our above analysis as Udaan is still primarily B2B marketplace and as the size of the funding could skew the analysis.
We predict that 2021 will see massive adoption of digital and more than 200 Fintech startups getting funded with an expected amount ranging between 3 to 4 billion dollars.
This investment will be focused on SME Neobanks, Lending Fintechs, Fintech Enablers (or Fintech Infrastructure platforms), Insurtechs, and Embedded finance. Marketplace platforms, Retail Neobanks, Wealthtechs, and Regtechs would continue to lag in the funding rounds. As for valuations, we see a significant jump linked to higher digital adoption, availability of bigger funds with VCs, and increased interest of Banks & Financial Institutions in the ecosystem.
