India has overtaken China in attracting venture capital (VC)-backed investments in the fintech sector both in terms of deal value and volume in the March quarter, said data and analytics firm GlobalData.
This comes amid diminished investment appetite for fintech startups due to the covid-19-led global economic crisis. China, where the pandemic originated, has been particularly hit hard.
In the last two years, China’s fintech startup ecosystem was a breeding ground for VCs. This trend has now been reversed with Indian fintech startups attracting more investments.
“In Asia, though there is an overall pullback in VC funding of fintech startups in Q1 2020, India grabbed the top spot as China was hit by the pandemic-induced economic recession," said Ayushi Tandon, fintech analyst, GlobalData.
Fintech startups in India attracted VC investments of over $330 million in Q1 2020, compared with China’s $270 million. In terms of deal volume, the number of VC investments in India stood at 37, while China registered 26 deals, said GlobalData.
Startups in the payments and lending sectors led the number of investments in India, whereas China’s deals were more in cross-sector fintech startups. Fintech startups in the analytics tech area represented the highest number of deals in India as well as in China.
In February, BharatPe, a New Delhi-based startup, helping merchants accept digital payments for the first time and providing them access to working capital, had raised $75 million in a new round. In March, fintech startups Veritas Finance and Bengaluru-based payments technology firm Juspay had raised $46.99 million and $21.6 million, respectively. In January, MoneyTap, a consumer lending firm, had raised $70.26 million in a Series B round.
The fintech sector has been on a strong growth path for some years in India, driven by payment systems like UPI. It gained traction during the lockdown amid a growing move towards digital and contactless payments. Analytics, too, was a big growth area, and will be heavily in demand as lenders want alternative credit history tools for small businesses. The upside for fintech is that India is an under-penetrated market, said experts.
“I wouldn’t worry about competing with China on fintech. Both are big markets, China much bigger, and India with higher growth potential. Despite the covid-19 disruption, China remains huge, but it’s far better penetrated. Their top payments platform Alipay and WeChat have nearly 900 million and a billion users, respectively," said Prasanto K. Roy, a tech policy consultant.