In the first half of 2023, the Indian fintech sector continued to receive the third-highest amount of funding globally, according to a new research by market information platform Tracxn. Notably, the nation falls short of the US and the UK, just as it did the year before.

When compared to the impressive $4.3 billion raised in the first half of last year, investments in Indian fintech start-ups fell significantly by 67 percent in H1 2023, totaling $1.4 billion. Despite this decline, the money raised in the first half of 2023 only fell by 6% from the $1.5 billion raised in the second half of 2022, according to the report.

Fintech start-ups showed significant growth in the first quarter of 2023, raising $1.18 billion in total, or more than 84% of the total funds raised in the first half of the year. Notably, the amount of money raised in the first quarter of 2023 was double that of the previous quarter (Q4 2022). The second quarter of this year, however, saw a considerable decline in financing, making it the least funded period since 2021.

According to a research titled "FinTech - India Semi Annual Funding Report - H1 2023," there were seven $100 million rounds in the first half of 2023, however no new unicorns were noted, as opposed to four in the same period in 2022. The number of acquisitions grew somewhat to 19 in the first half of this year from 13 in H2 2022, but remained lower than the 26 recorded in H1 2022. There were no new IPOs during the first six months of the year compared to two each in H2 2022 and H1 2022.

Payment, alternative financing, and internet-first insurance platforms were the top-performing areas in the fintech industry throughout the time, with payment start-ups leading the way, receiving a sizable 55% of total funding. Funding in the payment category increased threefold from H2 2022 to H2 2023, demonstrating tremendous development not just in India but also globally, as it emerged as the best performing segment in the US fintech market during the same time.

IPV, Blume Ventures, and Titan Capital were the top seed stage investors, while Elevar Equity, TPG, and Peak XV Partners were the top early-stage investors. The leading investors in late-stage rounds were OP Finnfund Global Impact Fund I and Avataar Ventures.

Bengaluru emerged as India's leading centre for fintech start-ups in H1 2023, raising an astonishing $949 million, which was 2.5 times the capital raised by the next two cities on the list, Mumbai ($218 million) and Jaipur ($150 million). Notably, firms headquartered in Bengaluru accounted for a sizable 67% of total capital raised in the fintech sector during the first half of 2023.

According to the research, the drop in financing may be ascribed to a considerable drop in early-stage investments, which fell by 81% compared to H1 2022 and 68% compared to H2 2022. Furthermore, seed-stage financing decreased by 38% in H1 2023 compared to the previous six months and 70% compared to the first half of 2022. While there was a hopeful 66% increase in late-stage funding in the first half of 2023 compared to H2 2022, it still represented a significant 62% reduction from the same time the previous year

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