Investors favour late-stage Indian fintech firms over early and seed-stage ones

Investors in Indian fintech firms are backing late-stage firms over their early and seed-stage counterparts, per Tracxn’s latest report on fintech funding in India.

Investors in Indian fintech firms are backing late-stage firms over their early and seed-stage counterparts as the country emerged as the third-largest recipient of fintech funding globally, trailing only the US and the UK.

Per market intelligence platform Tracxn’s latest report on fintech funding in India, in Q1 2025, Indian fintech firms raised $366 million, marking a 35% decline from the $571 million secured in the same quarter of the previous year. However, this figure is consistent with the $365 million raised in Q4 2024, suggesting a stabilisation in funding levels after a period of fluctuation. The distribution of funding across different stages reveals significant shifts as late-stage funding saw a notable 47% increase, reaching $227 million, compared to $154 million in Q4 2024.

This trend indicates that investors are increasingly willing to support mature fintech companies with substantial growth potential. Conversely, early-stage funding experienced a substantial 56% drop, with only $92.6 million raised, compared to $210 million in Q1 2024. This decline suggests that early-stage ventures are facing challenges in attracting capital, possibly due to heightened competition and market saturation.

Seed-stage funding also saw a decline, with $45.9 million raised, a 39% decrease from $75.5 million in Q1 2024. This trend underscores the difficulties faced by nascent fintech startups in securing initial funding, which is crucial for their development and growth.

The overall decline in funding can be attributed to various macroeconomic and geopolitical factors, including bearish stock trends, U.S.-imposed tariffs, global trade tensions, and rising inflation, all of which have discouraged venture capital inflows into the sector.

Despite these challenges, Tracxn’s report notes that India’s GDP growth is projected to remain robust at approximately 6.5% for FY 2025. Additionally, the increasing acceptance of the Unified Payments Interface (UPI) beyond India’s borders, in countries like Singapore, Nepal, and Sri Lanka, presents a promising opportunity for Indian fintech firms to expand internationally and attract more capital. This global expansion could potentially mitigate the impact of domestic funding constraints.

The report also identifies significant growth in specific segments of the fintech sector. Banking Tech emerged as the highest-funded sector, with $108 million raised, marking a 9% increase from Q1 2024 and a substantial 1700% rise from Q4 2024. This growth was driven by the increasing demand for digital banking solutions and the expansion of financial services to underserved populations. Zolve, a cross-border neo-bank, raised $51 million in Series B funding, accounting for 47% of the funding in this space.