India secures third position in terms of funding for the fintech sector
India has secured the third position globally in terms of funding raised for the fintech sector in Q1 2025, following the United States and the UK. The Q1 2025 witnessed a total funding of $366 million marking a decrease of 35 per cent compared to the $571 million raised in Q1 2024. However, similar funding of $365M was raised in the previous quarter (Q4 2024). The majority of the funding in this space has been seen in the late-stage rounds. Late-stage funding witnessed a 47 per cent increase to $227 million, compared to $154 million raised in Q4 2024 and a 21 per cent decrease from $286 million raised in Q1 2024. This data was revealed in the Tracxn's Quarterly India FinTech Report Q1 2025. Tracxn is a data intelligence platform for private market research.
As per the report, Q1 2025 witnessed a significant 56 per cent drop in early-stage funding, which is at $92.6 million compared to $210 million in Q1 2024 and a 41 per cent decrease from the $157 million raised in Q4 2024. Seed-stage funding witnessed $45.9M in funding, a decline of 39 million compared to $75.5 million raised during Q1 2024 and a 16 percent decline compared to $54.6 million raised in Q4 2024.
The report points out that after peaking in Q4 2021, the fintech funding has steadily declined, with minor spikes in Q1 2023 and Q3 2024. This decline can be attributed to several factors, including macroeconomic challenges and geopolitical headwinds. The Indian economy faced bearish stock trends, US-imposed tariffs, global trade tensions, and rising inflation, discouraging venture capital inflows. Additionally, large fintech deals, which typically drive overall funding volumes, were absent in Q1 2025.
The Tracxn report observes that as the fintech landscape becomes more crowded, market saturation has intensified competition among startups, reducing returns on investment and making investors hesitant to commit funds to new ventures. This period saw only 10 companies securing first-time funding, compared to 29 in Q1 2024.
Interestingly, as per the report despite these challenges, India's GDP growth for FY 2025 is projected to remain resilient at approximately 6.5 per cent. Furthermore, the rising acceptance of UPI beyond Indian borders in countries like Singapore, Nepal, and Sri Lanka presents a significant opportunity for Indian fintech players to expand operations overseas and attract more capital into the sector. As per the report, March 2025 was the most funded month of the quarter, with $187 million raised, accounting for 51 per cent of the total funds.
The report highlights that the sector witnessed significant growth in specific segments, with Banking Tech, Internet First Insurance Platforms, and Investment Tech emerging as top performers in Q1 2025.
The quarter also witnessed 10 acquisitions, reflecting a 67 per cent and 100 increase compared to that of 6 and 5 acquisitions in Q1 2024 and Q4 2024, respectively. Notably, two acquisitions had a valuation exceeding $100 million. Magma General Insurance, a multi-category insurance provider, was acquired by DS Group and Patanjali Ayurved for $516 million. Axio, a Bengaluru-based online lending platform offering point of sale financing, was acquired by Amazon for a price of $150 million.
As per the report, Bengaluru emerged as the leader in total fintech funding raised during Q1 2025, followed closely by Gurugram and Mumbai, reaffirming the significance of these cities as fintech hubs in India's startup landscape. Peak XV Partners, Angel List, and LetsVenture were the top investors in the space in this quarter and 100Unicorns, Blume Ventures, and Antler led the seed investments in Q1 2025, while Peak XV Partners, Accel, and Beams FinTech Fund were prominent in early-stage investments.
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