Fintech must wait for spring

The funding winter shows signs of thaw but the industry is under greater scrutiny, reports Raghu Mohan

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"The days of fintech vanity " business models are over, and the focus is now on governance and the road to profitability," says Rohan Lakhaiyar, partner (financial services-risk) at Grant Thornton Bharat. A lot is at stake.

The Centre for Advanced Financial Research and Learning (Cafral), in its first 'India Finance Report (IFR)' released last November, said of the 14,000 startups born between 2016 and 2021, close to half were fintech. It projected lending by these entities to exceed banks' by 2030. This may have to be looked afresh.

Tracxn-a data intelligence platform for private market research - has it that fintech funding stood at $2 billion in 2023, a fall of 63 percent and 76 per cent compared to the preceding years: $5.4 billion in 2022 and $8.4 billion in 2021. As for debt, the higher risk weightings placed by Reserve Bank of India (RBI) on bank lending to non-banking financial companies (NBFCs) means many may not be able to source credit lines (fintech is an NBFC variant).

There is also a hint of a change in bank-fintech partnerships. Mint Road, in its 'Report on the Trend and Progress of Banking in India' (FY24), is for caution when relying solely on pre-set algorithms on which the models operate.

Governance warning