Get All Access for $5/mo

7 Things That Made Fintech a Promising Sector In 2023 The Indian fintech sector, already on a strong recovery path, is set to maintain its momentum in 2024, outpacing its global peers, say experts

By S Shanthi

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.


2023 has helped India solidify its status as a global fintech leader, boasting a huge adoption of fintech products, say experts. An EY report projects the Indian fintech market to reach a cumulative value of $200 bn by 2030 and this year has been a key year in that direction.

Here are seven things that established fintech as a promising sector this year despite the global downturn and the resulting funding winter.

Funding revival

During the first half of the year, the sector saw a significant reduction in funding compared to the previous year. Funding dropped by 67%, with fintech startups raising $1.4 billion, a sharp decrease from $4.3 billion raised in the same period in the previous year, according to the market intelligence platform Tracxn. However, the sector witnessed a notable turnaround in the third quarter of 2023. Fintech funding surged by 68%, with a total of $436 million raised in this period.

"Although this was mostly driven by large deals in later-stage companies. This surge was a significant recovery from the funding winter experienced by fintechs and tech startups over the past 1-1.5 years. Overall early-stage companies faced issues in fundraising, especially at Series A levels," said Manoj Kumar Agarwal, co-founder and managing partner, Seafund.

UPI continued to steal the show

Unified Payments Interface (UPI) has been a game-changer for India. It is a system that powers multiple bank accounts into a single mobile application (of any participating bank), merging several banking features, seamless fund routing & merchant payments into one hood, NPCI explains. It also caters to the "Peer to Peer" collect request which can be scheduled and paid as per requirement and convenience. In FY 2022, PhonePe held 46 percent share of UPI usage in India, followed by Google Pay with 34 percent. This year UPI has been extended to cross-border transactions as well. This can further empower individuals and businesses in participating countries, particularly those with limited access to traditional banking services, say experts.

"The year brought about significant milestones, including the Reserve Bank of India (RBI) raising the limit on UPI transactions and the National Payments Corporation of India (NPCI) facilitating credit on the UPI platform. These developments are poised to be transformative, opening avenues for a new borrower segment," said Surabhi Sanyukta, Vice President of investments, BlackSoil.

Rise of lending-tech

Driven by the fintech innovation in India, the coronavirus pandemic, and other key events the economy has undergone an irreversible shift towards digital transactions, encompassing all industries. This year, the sector was led by payments (RTPS) and lending. Digital lending is gaining momentum like never before. Be it fintech startups pivoting completely to lending or adding a lending layer or prioritizing lending over other verticals, digital lending is driving growth for companies. Some cases in point are CRED acquiring Creditvaidya to focus on lending, BharatPe launching a separate consumer lending business PostPe and Paytm's financial situation improving drastically reportedly due to its lending business.

"Noteworthy developments occurred in the lending domain, with the emergence of the B2B lending segment as a crucial solution to address the credit crunch faced by small and medium-sized businesses," said Sanyukta.

Increased focus on path to profitability

A positive shift towards profitability was observed among fintech companies. More than 70 percent of founders and CXOs believe most fintechs may not be profitable in the next two to three years owing to an increased focus on the scale as opposed to profitability and compliance, a report by Boston Consulting Group (BCG) and Matrix Partners India says.

"In response to these market changes, fintechs are concentrating on profitability and developing sustainable business models. Their strategies include fostering long-term customer relationships and channeling investments into revenue-enhancing innovations. Fintechs that strategically build competitive moats, nimbly adjust to regulatory changes, and effectively tap into India's extensive unbanked market, all while limiting their dependency on external capital, are expected to emerge as winners in 2024," said Bikram Mahajan, partner, Unicorn India Ventures.

Change in investor outlook

This year saw a shift in investor approach as well. Instead of a 'growth-at-all-cost' outlook, they expect startups to focus on the basics. "Amidst a prolonged funding winter, fund managers are shifting from trend chasing and FOMO investing to a more analytical, first principles investing. This transition involves meticulously assessing fintechs, focusing on their unit economics and long-term sustainable growth rather than pursuing short-term multiple expansion or growth at all costs opportunities," said Mahajan.

An interesting pattern is that the same investors who were very focused on growth and only growth are comparing private companies to public ones. "For example, fintech companies with lending books are being compared to Five Star Finance (although it has a high PBV ratio). Expecting later-stage private companies in the future will be evaluated on models like Rule of 200 used in the US for public tech companies - A rule for fintech companies that suggests they target net retention rate, revenue growth, gross margin, and operating margin above 200," said Agarwal.

Innovation and advanced technologies

Regulatory initiatives like UPI credit and card on file tokenization, alongside the adoption of emerging technologies such as Gen AI, Quantum Computing, and Blockchain, continued to reshape fintech landscape this year too. "These advancements are driving innovation in areas like Green Lending, Embedded Finance, and cross-border payments, positioning India as a leader in the fintech narrative within the Asia-Pacific region and ensuring that fintech continues to be one of the top-funded sectors in 2024," said Mahajan

"Artificial Intelligence (AI) and its transformative impact on fintech is undeniable. From automating financial processes, developing investment strategies, analyzing vast datasets to detecting fraud, AI has been and will continue to be at the forefront," said Lakshmi Narayanan, managing partner, Patel Family Office.

Collaborative efforts

There has been an evolution from competition to collaboration within the fintech industry, with fintech CEOs prioritizing partnerships, which could be a strategic move to navigate through the challenges and leverage opportunities for growth, say experts.

"The outstanding performers within this sector were the neo-banking entities strategically forging collaborations with traditional banks. This strategic alliance enabled them to deliver highly personalized financial products and services tailored to the younger working demographic," added Sanyukta.

Boston Consulting Group (BCG) in association with Reserve Bank Innovation Hub (RBIH) has recently released a report titled "Financial Services Innovation for Bharat", which highlights how fintechs and players in the field have been doing innovation to integrate Bharat into the financial services ecosystem, which is pivotal to ensuring inclusive economic development in the country. It's a segment full of promise and untapped potential and is essential towards building a sustainable financial future of the country.

Fintech in 2024?

We asked experts to sum up 2023 and also share their predictions for the coming year and this is what they said.

  • "Looking forward, the sector's market opportunity in the country is estimated to reach $2.1 trillion by 2030, on the back of positive factors such as the India stack, increasing smartphone and internet penetration, favourable demographics and robust financial inclusion initiatives," said Lakshmi Narayanan, managing partner, Patel Family Office.
  • Overall, 2023 was a year of contrasts for India's fintech sector, marked by an initial slowdown in funding, followed by a strong rebound, alongside an encouraging shift towards profitability and collaboration.
  • It was also the year where the regulator was very active. It is clear that the fintech sector is not going to be like food ordering or booking cabs and will have controls and oversight. It's also very clear that you need to have some sort of license (PG/PA or PPI in payments, NBFC in lending, and so on).
  • "A key highlight was the surge in digital payments, driven by increased online transactions and government initiatives for a cashless economy. The year saw a notable shift in consumer behavior, with credit card spending surpassing debit card usage for the first time despite debit cards outnumbering credit cards by a considerable margin. This shift signifies vast potential in a burgeoning consumer ecosystem," said Anirudh A Damani, Director, Artha Group.
  • A key to sustaining this growth will be balancing rapid expansion with prudent lending practices, ensuring quality over quantity in credit disbursements. Stronger players will likely emerge as the market matures, benefiting from better margins and solid growth prospects.
  • The Indian fintech sector, already on a strong recovery path, is set to maintain its momentum in 2024, outpacing its global peers.
  • This resurgence, marked by $100M+ mega deals and a 50% recalibration in late-stage deal valuations in 2023, indicates a shift toward more sustainable growth.
S Shanthi

Former Senior Assistant Editor

Shanthi specializes in writing sector-specific trends, interviews and startup profiles. She has worked as a feature writer for over a decade in several print and digital media companies. 


News and Trends

Indigrid Technology and Hour4u Raise Early-Stage Funding

Here are the Indian startups that announced early-stage funding rounds.

Growing a Business

He Immigrated to the U.S. and Got a Job at McDonald's — Then His Aversion to Being 'Too Comfortable' Led to a Fast-Growing Company That's Hard to Miss

Voyo Popovic launched his moving and storage company in 2018 — and he's been innovating in the industry ever since.

Starting a Business

I Left the Corporate World to Start a Chicken Coop Business — Here Are 3 Valuable Lessons I Learned Along the Way

Board meetings were traded for barnyards as a thriving new venture hatched.

Business News

Joey Chestnut Is Going From Nathan's to Netflix for a Competition 15 Years in the Making

Chestnut was banned from this year's Nathan's Hot Dog Eating Contest due to a "rival" contract. Now, he'll compete in a Netflix special instead.

Health & Wellness

Get a Year of Unlimited Yoga Class Downloads for Only $23 Through June 17

Regular exercise has been proven to increase energy and focus, both of which are valuable to entrepreneurs and well-known benefits of yoga.

Business Culture

Why Remote Work Policies Are Good For the Environment

Remote work policies are crucial for ESG guidelines. Embracing remote work can positively impact your business and employees.