Indian Fintech Firms Raise Over $2 Billion in Funding
As the pandemic drives an intense push towards contactless finance, investors have been busy spotting the most promising products and services. In the first half of 2021, India’s fintech sector raised more than $2 billion in investments, says the KPMG Pulse of Fintech H1’21 report.
Overall, $2.055 billion worth of investments flowed into this sector, which is $411 million more than what was recorded in the first half of 2020. Besides, the total investment into the fintech sector has already crossed 90% of the previous year’s figure. In 2020, Indian fintech firms had drawn around $2.253 billion in funding.
Even globally, investments into the fintech sector grew from $87 billion in H2’20 to $98 billion in H1’21.
Fintech Firms That Led Investments in H1’21
Digital banking firms that have created and introduced unique products and services in the market have been attracted a lot of investment. Other areas of interest have been insuretech and wealthtech, especially in sectors like digital lending and payments.
Some of the biggest funding statistics in the country in 2021 include:
- Pine Labs (Merchant payment platform): The Private Equity funding of $285 million for this Noida-based firm was the third-largest deal in Asia.
- Cred (Financial software): The fourth-largest deal in Asia was the Series D investment of $215 million in this Mumbai-based financial software company. Currently, CRED is in talks with investors to further raise $5.5 billion in funding for further investments, and international expansion, according to an article on TechCrunch.
- Razorpay (Digital payments): The eighth-largest deal in Asia, was the Series E funding of $160 million in this Bengaluru-based payments app.
- KreditBee (Lending): The tenth-largest deal in Asia was the Series C investment of $153 million in this Bengaluru-based lending app.
- OfBusiness (Lending): $110 million
- BharatPe (Merchant payment platform): $108 million
Insurtech Firms That Have Attracted Investments in H1’21
Exits are Going to Increase in India
The KPMG report also revealed that there are going to be more exits in India, in terms of initial public offerings (IPOs) and acquisitions. On the Merger and Acquisition (M&A) front, larger fintech, banks (especially Wealthtech platforms and Neo Banks), and fintech services conglomerates may partner with domestic fintech firms.
Paytm’s parent company One97 Communications has already received ₹16,600 crores ($2,237,457,560), the largest IPO in India to date, says an article in The Times of India. Paytm, Policybazaar, MobiKwik, Cred, and Digit Insurance have already emerged as fintech unicorns.
Factors That Led to the Strong Start in 2021
Fintech business models are designed to offer a great customer experience and have the inherent benefit of leveraging data. This attracts investors significantly. Besides these factors, the KPMG report points out the increased prominence of digital banking. Digital banks have essentially worked as SaaS providers while bank partners have handled regulatory functions. Overall, the main factors that have contributed to this immense growth in funding include:
- A lot of dry powder (cash reserves held by VC firms for major future investments).
- Digital acceleration of businesses in the Covid-19 scenario.
- Growing diversification of fintech hubs and subsectors.
Going forward some sectors which need strong focus in the second half of 2021, include digital identity and cybersecurity. Regulatory scrutiny around virtual assets and cryptocurrencies will also remain in highlight.