India's fintech sector attracted over $2 Billion in investments in the first half of 2021, a recent report by a global accountancy firm has stated. According to KPMG's 'Pulse of Fintech H1'21' report, a total of $2.055 billion flowed into the sector, which is $411 million more than the amount recorded in the first half of 2020. The total investment into India's fintech sector, moreover, has already crossed 90 per cent of the 2020 figure. Last year, the sector had attracted nearly $2.253 billion in investment.
"Fintech's business model, with its inherent benefit of leveraging data besides providing great customer experience, are the biggest attraction for investors," said Sanjay Doshi, Partner and Head - Financial Services Advisory, KPMG in India, on the boom in investments into the sector. He added that segments such as e-commerce and digital financial services have got a significant boost due to the social distancing limitations during the Covid-19 pandemic.
Some of the fintech companies that have received funding in this period include Pine Labs' ($285 million via Private Equity funding round), Cred ($215 million), RazorPay ($160 million), KreditBee ($153 million), OfBusiness ($110 million) and BharatPe ($108 million) – the last five by Venture Capitalist funding rounds.
Insuretech – technology-driven insurance start-ups which are a subset of the fintech sector – has emerged as a major attraction for investors, the report noted. Notable insurtech start-ups that have received Private Equity or Venture Capital funding this year include Turtlemint ($46 million), RenewBuy ($45 million), and Digit Insurance ($18 million).
“Over the next 12 months, we expect leading fintech unicorns trying to tap into the strong capital market by looking at an IPO,” the report quoted Doshi as saying.
Given that the IPO market in India is buoyant right now, fintech firms like Paytm, MobiKwik and Policybazaar are looking to go public. While Paytm and Policybazaar entered the unicorn – start-ups valued at over $1 billion – club in 2017 and 2018 respectively, media reports suggest that MobiKwik is in line to enter the exclusive club this year. Additionally, Bangalore-based fintech start-ups Cred and Digit Insurance, and Delhi-based BharatPe have been the 2021 entrants to the club.
“With online intermediation being significantly adopted by financial services and retail customers, data-led analytics will be a driver for future business models,” Doshi commented.
The fintech boom is not limited to India. Globally, investments into the sector reached $98 billion in the first half of 2021, rising from $87 billion in the last six months of 2020. The United States alone has accounted for over 40% of the total investments – $42.1 billion – in the sector this year.
The report credited the digital push as a result of the Covid-19 pandemic, ‘dry powder' wealth, and the increasing diversification of fintech hubs and sub-sectors for the strong 2021 experienced so far. For the uninitiated, ‘dry powder' is a slang for cash reserves held by venture capital firms for potential future investments.
The nascent but ever-evolving international blockchain and cryptocurrency segment has recorded double the amount of investment this year. From $4.3 billion in 2020, total investment, buoyed by a growing investor base, has reached $8.7 billion in the first six months of 2021.
The report also noted that investors now have a much better understanding about crypto assets and their operational and procedural aspects, adding that continued maturation of the cryptocurrency segment is something to watch out for in the remaining months of 2021.