Fintech Startups Face 19% Funding Decline In 2024, Down To $2.5 Bn

Caught in the grip of an unforgiving funding winter for the last few years, Indian startups breathed a sigh of relief in 2024. As cautious investors steadily began to deploy dry powder last year, the homegrown new-age tech ecosystem witnessed green shoots of revival on the funding front, which was up 20% year-on-year (YoY) to $12 Bn+. 

However, the year did not prove to be too promising for the great Indian fintech sector, even though it emerged as the most-funded sector, surpassing others. Moreover, the sector trailed behind ecommerce and enterprise tech in terms of deal count.  

As per Inc42’s Annual Funding Report, 2024, funding raised by homegrown fintech ventures plunged 19% to $2.5 Bn in 2024 compared to $3.1 Bn in the year-ago period. With this, 2024 turned out to be the third consecutive year of funding decline for the fintech ecosystem, which also returned to pre-2021 funding levels.

While largely to blame for the falling numbers were wary investors, fintech funding also took a hit as fewer late-stage deals materialised in 2024. Fintech mega deals (in excess of $100 Mn) nearly halved to six last year compared to 12 in the preceding year. This was even lower than the 2022 quantum when the sector notched 10 deals above $100 Mn. 

On the positive side, the total deal count rose 23% to 162 in 2024 against 132 in 2023. On the back of this, the median ticket size of fintech startups rose sharply by 32% to $5.4 Mn during the year from $4.1 Mn in 2023. However, the media ticket size was still lower than the 2022 and 2021 levels when the metric stood at $6.4 Mn and $6 Mn, respectively. 

Notwithstanding the double-edged sword that 2024 was for fintechs, it was not a washout year for the sector. Much more was brewing beneath the surface.

For instance, the fintech sector crossed the $30 Bn funding milestone in 2024. The year also saw the ecosystem add two new unicorns to its kitty, Moneyview and Perfios, while the likes of Finova Capital, Drip Capital and M2P stood out for bagging some of the biggest deals this year (all in excess of $100 Mn). 

Besides, the sector continued to dominate the Indian investment landscape in 2024 across stages. It was the most-funded sector at the late-stage level, grabbing 23.8% (or $1.7 Bn) of the total $7 Bn raised by Indian startups at this stage across sectors. 

Fintechs also took home the biggest number of late-stage deals last year. At 53 deals, the sector was far ahead of its neared rival ecommerce, which could manage only 23 late-stage deals. 

The trend percolated at the lower levels, too. Homegrown growth-stage fintech players accounted for $599 Mn (or 17.1%) of the total $3.5 Bn bagged by Indian growth-stage startups in 2024. In terms of growth-stage deal count, fintech platforms took the second spot with 42 transactions, trailing only behind ecommerce. 

The sector also shone brightly at the seed stage and was the second most-funded sector at the level. Early-stage fintech startups accounted for 18.3%, or $163 Mn, of the total $893 Mn raised by seed stage startups in the country in 2024.

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Lending Tech Continued To Be The Fintech Power Core

Expected to breach the $1.3 Tn mark by 2025, lending tech continued to dominate the fintech funding cycle in 2024. The sub-sector lapped up $1.7 Bn in funding, accounting for 68% of the total funding raised by the homegrown fintech sector during the period. 

Lending tech also clinched 88 deals in 2024, more than half (54% to be precise) of the total 162 funding deals netted by the sector last year. 

Other key movers within the sector were fintech SaaS and investment tech, which lapped up $247 Mn and $201 Mn in 2024, respectively. Payments startups also grabbed deals worth $82 Mn last year.

Notably, this dominance of lending tech within the fintech ecosystem has been a recurring theme for the past decade. Between 2014 and 2024, the sub-sector accounted for $10 Bn of the total $30 Bn raised by fintech startups in the country. 

That said, Bengaluru continued to be the country’s fintech hub. In the past 10 years, Bengaluru-based fintech platforms have raised more than $10 Bn, followed by Delhi NCR with $10 Bn. Fintech ventures located in India’s financial capital, Mumbai, have been able to raise $5 Bn since 2014. 

What’s In Store For Fintechs In 2025?

While the homegrown fintech ecosystem has made great strides in the past decade, the sector is staring at a bigger disruption in 2025 on account of artificial intelligence (AI). Industry insiders see AI paving the way for new advisory and underwriting models. 

Compliances will continue to remain a key bottleneck for fintech startups, especially for payment platforms. There are also fears that larger digital payment processors may take a hit as the Centre is expected to continue with its zero MDR regime. 

Industry watchers also see more and more fintech players shift their bases to India to cash in on the ongoing initial public offering (IPO) boom. However, competition is on the prowl with Jio Financial Services (JFS) expected to go all guns blazing, investing heavily to take on the entrenched incumbents in the fintech space, especially super apps like CRED, Groww and PhonePe. 

While it remains to be seen how the sector will shape up in 2025, there is no doubt that fintechs remained the centrepiece of attraction for investors in 2024. With much lined up for later this year, the ecosystem has its fingers crossed for a bumper year.

[Edited By Shishir Parasher]

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