The Indian fintech sector has brought in as much as over $2 billion in investments during the first half of this year. According to the latest KPMG report, this is almost the same amount of funding the sector got in the entire 2020, making this the best run ever for the fintech ecosystem.
According to the report, the record investments have been led by merchant platform Pine Labs' $285 million from private equity funding round, $100 million venture capital funding rounds, Cred's ($215 million), Razorpay ($160 million), Kreditbee ($153 million), Business ($110 million) and Bharatpe ($108 million).
As per the findings, most of the money has flown into the digital banking space and the second biggest was insurance, wherein the first half saw several such startups, including Turtlemint ($46 million), Renewbuy ($45 million), and Digit Insurance ($18 million) raising funds from the mid-sized private equity and venture capital funds, it added.
Also, four of the top ten deals in Asia were for domestic companies during the period under review. While the Noida-based Pine Labs' $285 million was the third-largest in Asia, the $215 million in a Series D round by the Mumbai-based financial software firm Cred was the fourth largest in the continent.
Also Bengaluru-based payments app Razorpay's raised $160 million in the series E round, making it the eighth largest, and lending app Kreditbee's mopped up $153 million in series C round, the tenth-largest in Asia.
The report also speculates that the exits are going to increase in the country, both in terms of IPOs (Policybazaar has filed for a Rs 6,500 crore issue), while Paytm has filed for a Rs 16,500 crore issue, making it the largest-ever IPO in the country; and also in terms of acquisitions.
On the M&A front, fintech could be targeted by banks, larger fintech, or even a fintech services conglomerate. The report expects leading fintech unicorns to try to tap into the strong capital mark by looking at IPOs over the next 12 months. Banks are also keen to partner with fintech, especially neo-banks and wealth tech platforms, the report said.
Globally, too, the first half was a record with fund flows totaling $98 billion, compared to $121.5 billion in 2020. Of the total investments, the Americas were the most robust with over $51 billion investments, followed by the EMEA region with $39.1 billion, but the Asia-Pacific region saw a dip to $7.5 billion from $13.4 billion a year ago.
Merger and acquisitions continued at a very healthy pace, accounting for $40.7 billion across 353 deals globally against $74 billion across 502 deals during 2020. The report also expects the second half to remain very robust in most regions. While the payments space is expected to remain a dominant driver of fintech investments, revenue-based financing solutions, banking-as-a-service models, and B2B services are expected to attract more investments.
Given the rise in digital transactions, and the subsequent increase in cyberattacks and ransomware, cybersecurity solutions will likely be high on the radar of investors, the report noted.
