What’s In Store For Indian Fintech Ecosystem In 2025?

Where do the events of 2024 leave India’s fintech ecosystem? 

While the fintech opportunity is said to have grown 6X in the past ten years, the incessant regulatory challenges as well as concerns around profitability have hamstrung even the most scaled-up and capitalised companies. 

Prominent examples from the past year include the derailing of Paytm’s banking arm after the RBI intervention on compliance lapses, while Sachin Bansal’s Navi Finserv saw a disruption in its lending business due to similar action against digital lenders.

On the other hand, changes by SEBI left the likes of Groww and Zerodha staring at a bearish future. 

When it comes to the fortunes of PhonePe, CRED, Google Pay and others, profitability is the single-biggest hurdle in the way, even as the UPI opportunity has grown beyond Indian territory and expanded overseas. 

Fintech Predictions For 2025

Considering the mixed bag that was the past year for Indian fintech, will we see the scales tilt towards a particular outlook in 2025? Will fintech startups make the most of the IPO opportunity, and which areas will see the biggest disruption from AI?  

These are some of the most pressing questions for fintech startups today — especially as they deal with the entry of giants such as Jio Financial Services, and competition from regulated banks also eyeing super app success.

More Reverse Flipping & IPOs In Store For Fintech

The bull run for the Indian public market in the past few years has opened the doors for more new age tech stocks listings in the coming year, with the fintech ecosystem expected to take the front seat.

Last year, we saw MobiKwik join Paytm, Fino and PB Fintech in the public markets, and now the likes of Pine Labs, Groww, Razorpay among others are looking to get there too. Besides NBFCs Aye Finance and Avanse Financial Services who have already filed for IPOs, we can potentially see listings of PayU, InCred and Pine Labs this year.

As a result, several of these startups are in the process of flipping back to India, while Groww has already redomiciled to India from the US. 

“For fintechs with a majority India market focus, it is definitely pragmatic to be domiciled in India and debut their listings here first. We are seeing some of India’s largest private fintechs in the process of changing their domicile for this purpose, and this re-shoring is a sound strategy for them to continue building for the long term. Their future will be India first,” 3one4 Capital’s founding partner Pranav Pai opines. 

Meanwhile, lendingtech startup Fibe’s cofounder and CEO Akshay Mehrotra sees more fintech listings towards the second half of 2025. 

Regulatory Challenges For Fintech To Ease Off In 2025

In the past year, the RBI was particularly active when it came to curtail the rapid expansion of fintech in India. Key actions included tightening norms for P2P lending, establishment of independent self regulation organisations to ensure compliance, as well as startup-specific intervention.

Needless to say, some of these regulatory challenges have caused significant distress within the fintech ecosystem. Recounting the tough regulatory times, Fibe’s Mehrotra joked, “Compliance cost is $20 Mn so early stage startups are going to be tougher to do.” 

In a similar vein, others pointed out that it is near impossible to build long term enduring value in any environment when the rules change this often. “While there are certainly some fintechs that have been careless with the existing regulations, the shifting boundaries due to such rapid regulatory change is definitely causing deep distress amongst India’s innovators,” 3one4Capital’s Pai added.

At the end of the year, Sanjay Malhotra replaced Shaktikanta Das as the new governor of the RBI. In his first media interaction since taking up the role, Malhotra placed emphasis on technology and innovation shaping the future of the financial services industry. 

Moving forward, Fibe’s Mehrotra foresees more mature businesses taking up the centre stage with many of the recent regulatory checks and balances in place.

“With the regulatory systems in place, it is now tougher to be in the industry and we are more likely to see only serious players emerge and continue to grow. Moving forward, I don’t see many hiccups from a regulatory front for the fintech ecosystem,” Mehrotra said. 

Focus Will Shift To Profitability

The fintech sector has been an investor favourite over the past few years. The past year was also the same as fintech took about 21% of the total $12 Bn Indian startup funding pie. However, investor interest in the sector has slid in the past couple of years — the total tally of $2.5 Bn last year was 19% lower than 2023. 

Despite this, multiple investors Inc42 spoke to are bullish on fintech investments in 2025. A key reason for this uptick is the increasing focus for fintech companies to become profitable. “Fintechs will surprise the ecosystem in the next cohort on this metric, and the promise of the Indian ecosystem in this sector will be interesting when it expresses this way,” Pai said. 

Investors see breakeven or profitability happening far earlier than expected for the next cohort of fintech entities. Further, valuations of startups, which jumped up in 2022, have also come down to more realistic numbers. 

VC firm Playbook Partners’ managing partner Dushyant Singh foresees better funding for growth or late stage fintech companies particularly, especially since this group of startups is focussed on unit economics and profitable growth. He is particularly bullish about backing startups at these stages operating in the wealthtech space. 

The Super Apps Race: Competing With Adani, Reliance In 2025

As predicted last year, we saw multiple large umbrella fintech entities gain prominence by offering multiple products to end users in a single platform. 

While UPI-leader PhonePe was able to zoom its revenue past the INR 5,000 Cr mark on the back of its super app play, other new emerging players also made headlines for their offerings in 2024. 

A prominent new name in 2024 was Flipkart-backed super.money. After a beta launch in the middle of the year, the super app has been able to aggregate a significant user base for its credit offerings and UPI payments business. 

Here it’s important to point out that deep pocketed conglomerates like Adani and Reliance have been bolstering their fintech play over the past couple of years.

In the past year, Adani Group’s super app Adani One launched co-branded credit cards as well as opening doors to entry in the ecommerce and payments space on the back of government-backed ONDC. 

Meanwhile, Reliance-backed Jio Financial Services also launched its super app ‘JioFinance’ in 2024, offering digital banking, UPI transactions, bill settlements, and insurance advisory.

Both these conglomerates are expected to deepen their fintech offerings, so we foresee a new dimension to the super app discourse in 2025, however, their success will depend largely on how well they capitalise on UPI payments at the top of the acquisition funnel.

Despite larger players on the prowl to capture a piece of the fintech pie, industry experts believe that it is not a sign of threat for startups but rather an opportunity. 

“Entrance of big players in the super app space is more of an affirmation of an intrinsic opportunity in the ecosystem. There is a lot of scope of penetration of financial products in India, serving enough headroom for all to grow. While there will be more intense competition from these new big players, the market is unlikely to see dominance from any one particular entity,” Playbook Partners’ Singh added.

AI To Become A Fintech Necessity In 2025

The past year, we have seen all sorts of headlines emerge from the heated conversation around the use of AI. Fintech companies have also begun the journey looking to optimise costs and make more efficient systems. 

A glaring example was Paytm where CEO Vijay Shekhar Sharma said the company leveraged automation and AI to trim its workforce. As a result, the customer support costs declined by 60% in the first two quarters of FY25 

Fibe’s Mehrotra believes that companies need to critically analyse the applicability of AI for their operations and build or get external help to build their AI tech stack in order to survive. 

Despite this, a large majority of companies are either looking to partner with established AI vendors or utilise a hybrid approach (a combination of build and buy) to build their tech stack. 

This presents the opportunity for new companies to build fintech-specific AI products. Early stage startups like OnFinance AI are looking to change the financial industry’s workflow efficiency through the power of AI in recent times. 

In particular, B2B models are coming up to help businesses in underwriting insurance, personal investment advisories, content marketing, among others. 

Investors are particularly bullish on early stage AI-based fintech players. Speaking with Inc42, 100X.VC’s partner Ninad Karpe said that AI has now emerged as a key governing factor for the VC firm’s early stage fintech investments. 

While the firm is planning to back 60-80 startups in 2025, a key chunk of these investments will be for startups offering fintech products and services, he added.

Respite On The Cards For Indian Crypto Ecosystem? 

Despite taxing crypto gains, the government has not come close to regulating cryptocurrencies in any way, but the WazirX crypto heist and major losses for investors might force the regulatory hand in 2025.

Plus, there seems to be a ray of light of hope for the Indian crypto ecosystem. India reaffirmed its leadership position in terms of the global cryptocurrency adoption for the second consecutive year in 2024. The country is now home to 11.8% of crypto developers and 5.4% of Web3 creators worldwide.

Trading volumes have gone up in sync with the skyrocketing Bitcoin value. 

In this year, the cryptocurrency ecosystem is poised to get a major boost from the US federal government. Industry experts are anticipating more clarity on the crypto front from the regulator, given the recent push of the RBI on launching its crypto-based Central bank Digital Currency (CBDC).

To expand its business scope in India, crypto major Binance has plans to make crypto trading more secure and robust. 

“Looking ahead to 2025, the focus will be on increasing knowledge and trust within the crypto community, fostering stronger collaborations with authorities, and enhancing blockchain utility to address real-world challenges,” Vishal Sacheendran, head of regional markets at Binance, said. 

VC interest is also expected to return to crypto startups focussing on infrastructure and enterprise applications, rather than just trading platforms. 

[Edited by: Nikhil Subramaniam]

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.