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Driven by payment services, Indian fintech investments double in 2019

Almost 57% of the fintech funding went into payments companies that are eying to grab a larger chunk of India’s soon-to-be USD 1 trillion digital payments market.

Fintech image. Source: Shutterstock

Fintech investments in India nearly doubled to USD 3.7 billion in 2019 from USD 1.9 billion a year before, making the South Asian nation the third-most preferred global destination for fintech investments last year, behind the United States and the United Kingdom, said a new report by Accenture, which analyzed the data collated by global venture-finance data and analytics firm CB Insights.

The number of deals in 2019 went up marginally to 198 compared to 193 deals secured in 2018, implying fatter cheques for Indian fintech startups. Of the total funding in Indian fintech companies, almost 57% went into payments companies that are eying to grab a larger chunk of India’s soon-to-be USD 1 trillion digital payments market. Investments in payments firms shot up to USD 2.1 billion in 2019 from about USD 660 million in 2018, registering a three-fold rise.

One97 Communications, the most valuable Indian startup and the parent company of payments company Paytm, raised USD 1.66 billion from two separate transactions in 2019, whereas American retailer Walmart-owned PhonePe bagged USD 210 million from investors in two separate deals. Tiger Global-backed payments solution company Razorpay raised USD 75 million.

Meanwhile, with major payments firms including Paytm and PhonePe venturing into insurance, investors have started paying attention to insurance tech startups. Funding in the insurance-tech space went up by 74% to USD 510 million funding last year, accounting for 13.7% of total funding. Most notably, insurance marketplace PolicyBazaar received USD 282 million from investors across two rounds. Lending firms grabbed 10.8% of the total investments with the deal value touching almost USD 396 million. Among all this, credit card payment startup CRED, set-up by co-founder of mobile wallet company FreeCharge, stood out as it raised USD 120 million.

This comes at a time when the global fintech funding slipped 3.7% to USD 53.3 billion as compared to 2018. American fintech deal value jumped 54% to USD 26.1 billion, while the UK fintech investments rose 63% to USD 6.3 billion.

The Accenture report found that Alibaba’s investment arm Ant Financial wrote cheques worth USD 14 billion, while there were three other multi-billion-dollar transactions from Chinese companies in 2019, which boosted the global fintech investments. However,  fintech deals in China dropped 92% in 2019 to USD 1.9 billion as the Asian country had record-breaking fundraising in 2018. Not surprisingly, Chinese funding was diverted to India’s emerging market, where digital payments and digital lending, both are expected to touch USD 1 trillion over the next few years.

“There’s a lot brewing in India’s fintech ecosystem and this steady flow of funds shows investors’ confidence in the industry’s future growth potential,” Sonali Kulkarni, managing director – Financial Services, Accenture in India, said in a statement. “The increase both in deal value and the number of deals is a good indicator of what’s to come and bodes well for the future development of cutting-edge financial technology in the country.”