India’s fintech industry to face hard time in 2023 as investments cool: Bain

• ByStartupStory     |    December 28, 2022

According to Rakesh Pozhath, partner at consulting firm Bain & Company, India’s $50 billion fintech industry will face challenges in the form of tougher regulatory scrutiny and tighter liquidity, resulting in higher cost of capital for some companies next year.

“Investors into the country’s fintech space that has drawn heavyweights from Warren Buffett’s Berkshire Hathaway Inc. to Masayoshi Son’s Softbank Group Corp., in the past few years, are getting more diligent as global financial conditions tighten. That has intensified the competition for capital” Pozhath said.

“Investors are looking at bottomline and topline actual monetization numbers and not just growth numbers in terms of number of customers, value of loans disbursed,” Pozhath, who has worked with global and Indian payment infrastructure providers, said. “No one is underwriting those metrics anymore.”

He further went on to say that it could result in a higher cost of capital for smaller fintech firms next year, as they aim to become non-banking companies to continue lending to customers.

According to a recent report co-authored by Pozhath, Indian fintechs have raised approximately $35 billion in funding since 2000, with approximately $10 billion of that coming in 2021. The $4.2 billion raised in the first half of 2022 was less than a year ago.

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