Digital payments shoot through the roof, but fintech funding disappoints
“Payment fintech is a crowded segment; the industry operates on thin margins and is always under pressure,” said Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock India, adding, “The NBFC sector is witnessing several liquidity constraints, overall credit disbursements, some of which that are facilitated by fintech companies have also been impacted.”
“Fintech includes several segments, such as insurance, loans, alternate credit scoring algorithms, lending, etc. There are many players in each of these segments vying for market share. The success factors for these solutions, in addition to value of transactions, include the number of users, revenue per user and margin per user. The margins are lower in these segments as there are many incumbent players in each of these segments,” Raina said.
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Below is an excerpt from the post which first appeared on Business Line on 5 August 2020:
Investments into the fintech sector soared last year and with this increased acceptance and preference for contactless payment methods over the past three months, one would assume that fintech funding would also touch new heights.
Dip in funding
But, contrary to expectations, the funding that went into the fintech start-up space in Q2 2020 was the lowest in the past nine quarters — only $184 million was invested in the April-June quarter this year, according to data from Venture Intelligence, a firm that tracks private companies’ investments, financials and valuations.
“Payment fintech is a crowded segment; the industry operates on thin margins and is always under pressure,” said Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock India, adding, “The NBFC sector is witnessing several liquidity constraints, overall credit disbursements, some of which that are facilitated by fintech companies have also been impacted.”
“Fintech includes several segments, such as insurance, loans, alternate credit scoring algorithms, lending, etc. There are many players in each of these segments vying for market share. The success factors for these solutions, in addition to value of transactions, include the number of users, revenue per user and margin per user. The margins are lower in these segments as there are many incumbent players in each of these segments,” Raina said.
Investment figures for fintech start-ups in July also do not paint a pretty picture. They garnered only $18.04 million and the sector was among the least funded, last month, while segments such as ed-tech ($164.95 million), media and entertainment ($53.90 million) grabbed more funding comparatively, according to data from Tracxn, a firm that tracks investments and financials of private companies and start-ups.
