Total funding for Indian start-ups experienced a significant decline of 40 percent in 2022, as stated in a report by financial services company IIFL Fintech. This decline can be attributed to factors such as the global economic slowdown and the ongoing war in Ukraine. However, the report indicates a positive shift in the funding landscape for 2023.
Despite the funding setback, the Indian start-up ecosystem is expected to achieve a record year in terms of ventures receiving private capital.
While larger late-stage investors remain cautious due to uncertainties surrounding emerging domains like cryptocurrency and metaverse, the early-stage ecosystem continues to thrive with increased activity.
The report highlights several key areas within the Indian fintech industry, including Payments, Digital Lending, WealthTech, InsureTech, and Neobanking. It predicts significant growth in these domains, with the payments landscape projected to exceed $100 trillion in transaction numbers by 2030.
Additionally, the digital lending market is expected to reach a substantial $515 billion by the same year.
Digital lending companies in India are anticipated to experience remarkable growth, with their book size projected to increase from $38.2 billion in 2021 to nearly $515 billion by 2030, representing a compound annual growth rate (CAGR) of 33.5 percent.
Similarly, Indian wealth-tech companies are set to grow from $20 billion in 2021 to an impressive $237.4 billion by 2030, with a CAGR of 31.6 percent.
The InsureTech sector in India shows promising prospects, with an estimated worth of around $88 billion by 2030 and a CAGR of approximately 33.7 percent.
The Indian neo-banking sector, which experienced a five-fold increase in funding in 2021, is expected to reach a value of $215 billion by 2030, with a CAGR of about 20 percent.
The report also highlights the substantial growth in prepaid payment instrument (PPI) transactions in India. The volume of PPI transactions has witnessed significant increases, rising from 493.92 crore transactions in FY21 to 658.12 crore transactions in FY22, and further reaching 746.67 crore transactions in FY23.
The total value of PPI transactions reached Rs 2.94 trillion in FY22 before slightly decreasing to Rs 2.87 trillion in FY23.
Ms. Mehekka Oberoi, Fund Manager at IIFL, commented on the report, emphasising how the Indian fintech industry has evolved and become a "one-stop shop" for addressing traditional financial service limitations while offering innovative and superior experiences.
The report aims to provide investors with the latest insights into the fintech ecosystem, including trends, opportunities, challenges, and the way forward.
Despite regulatory guidelines from the Reserve Bank of India, the Indian fintech industry has successfully adapted, as evidenced by significant growth in disbursements during the third quarter of FY23, reaching Rs 18,537 crore in terms of value—an increase of 118 percent year-over-year and 2 percent sequentially.
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