After having its moment in the sun for nearly two years, the fintech industry in India appears to be going through a rough patch.
In 2018, the sector attracted $1.7 billion (Rs12,000 crore) in investments, far lower than the $4.3 billion it had received in 2017, according to a report by consultancy KPMG. This was in contrast to the global trend. Worldwide, investments across mergers and acquisitions, private equity and venture capital funding in fintech more than doubled to $111.8 billion in 2018.
Deal volume was, however, up in India. The total number of investment deals in the country’s fintech sector increased in 2018 to 111, compared with 108 in 2017.
While mergers and acquisitions fuelled fintech investments in both the US and Europe, venture capital deals continued to reign in Asia, including India. The primary areas of interest for investors in India were payments and lending.
Within Asia, China accounted for the largest fintech deals in 2018. However, three of the top 10 deals during the year were in India: Paytm with $356 million; PolicyBazaar with $200 million, and CentrumDirect with $175 million of investment in total.
The volatility in regulatory environment is expected to continue in India “with the degree of change not expected to drop off in the near future.”
Fintech firms in India have been reeling under the supreme court’s directive in September 2018 that struck down the use of the biometric-based Aadhaar database. With mandatory KYC requirements, fintech firms are now forced to look for alternative ways to onboard users, shooting up overhead expenses. The industry is awaiting final directions from the central bank regarding alternative mode of authentication now that eKYC is not acceptable.