Indian Fintech Startups Move From Fast Growth to Fundamentals

After peaking in 2021 at over USD 8.4 billion in fintech funding across startups, India’s fintech funding has undergone a sharp recalibration. According to Tracxn and Bain data, fintech funding fell by over 60 per cent between 2022 and 2024, reflecting a broader global risk-off environment, tighter monetary conditions, and heightened regulatory scrutiny. However, this slowdown has not stalled innovation, but has reshaped how and where capital is deployed.

Regulatory clarity has clearly played a central role in this transition, with the RBI’s Digital Lending Guidelines (2022), the enforcement of default loss guarantee (DLG) norms, and stricter compliance requirements for NBFC-fintech partnerships. The new compliance norms have forced startups to formalise governance, risk management, and unit economics early in their lifecycle. While these measures initially slowed down credit disbursals, they have ultimately made fintech balance sheets more investable for institutional capital.

Sagar Agarvwal, Founder & Managing Partner at Beams Fintech Fund, said that the country’s fintech funding landscape has moved from a phase of abundant capital and rapid experimentation to one of disciplined, outcome-driven investing. 

“Earlier, scale and user acquisition were often enough to unlock large cheques. Today, growth capital is far more selective and closely tied to governance, compliance readiness, and sustainable unit economics. Investors are no longer funding potential alone; they are backing proven business models that can withstand regulatory scrutiny and market cycles. This shift is creating stronger, more resilient fintech institutions rather than short-term valuation stories,” said Agarvwal. 

The regulatory tightening coincides with a shift in investor expectations, particularly for Series B+ companies, where growth capital is increasingly linked to profitability pathways, underwriting quality, and maturity in leadership rather than just surface momentum. 

Agarvwal said, “For Series B-C fintech founders, raising institutional capital today requires far more than rapid growth metrics. Investors are looking for clear paths to profitability, strong risk and compliance frameworks, disciplined customer acquisition, and mature leadership teams. Founders must demonstrate that their business can scale responsibly, manage regulatory complexity, and deliver predictable returns. The focus has shifted from “How fast can you grow?” to “How sustainably can you build?”, and founders who internalise this mindset are the ones attracting long-term capital.”

At the same time, targeted regulatory openings are creating fresh capital opportunities. One such area is UPI-linked credit products, including UPI credit cards routed through RuPay. With UPI processing over 12 billion transactions per month and credit card penetration still under 6 per cent of India’s population, investors see UPI-credit collaboration as a structural growth lever. 

Kanika Mayar, Partner, Vertex Ventures SEA and India, said, “We believe UPI credit card is a unique product marrying UPI’s deep penetration with India’s growing demand for card and credit products. 

Beyond payments and lending, sector-specific fintechs are also drawing investor interest. Travel-focused fintech platforms, particularly targeting younger, high-spending consumers with co-branded credit products, are benefiting from both rising discretionary spending and improving credit access. India’s travel and tourism sector is projected to contribute USD 512 billion to GDP by 2030, while millennials and Gen Z already account for nearly half of new credit card issuances.

Mridul Arora, Partner of Elevation Capital that led travel-credit focused Scapia’s USD 40 million Series B Funding, said, “The travel fintech space represents a significant opportunity, especially considering that Gen Z and millennials now account for 50 per cent of all credit card issuance in India, pointing to a rapidly growing, digital-first consumer base that will fuel an USD 80-100  billion annual revenue opportunity by  2030. 

“Millennials and Gen Z are turning travel into a guilt-free, all-pleasure experience, which is setting the stage for rapid growth in the travel industry in India,” added Tejeshwi Sharma, MD, Peak XV, on Scapia Funding.

As capital becomes more selective, India’s fintech ecosystem appears to be entering a consolidation phase, one where fewer companies raise larger, more patient rounds. For investors, the emphasis is now on regulatory-aligned growth and durable business models.