Investor interest in fintech space falls

Chennai: After the initial phase of exuberance, PE and VC investors seem to have become more realistic about the Indian fintech space. In Q2 2019, PE/VC investments and merger and acquisition (M&A) deals in fintech companies dropped by 84 per cent from Q2 2018 levels and by 96 per cent from Q2 2017.  

In June quarter, fintech space witnessed deals valued $63.3 million, the lowest quarterly deal value since Q 3 2014. In Q2 2018, the total deal value stood at $403 million and in Q2 2017 it was the highest at $1,683 million, according to KPMG data.

A lot has been happening around  digital payments, and the fintech companies across the globe have been quite active in the recent times. In India fintech industry has been attracting investments since 2014. PE/VC investments and M&A deals have been on a rise since then.

In 2016, after demonetisation the fintech space witnessed heightened activity. Fintech companies like Paytm, MobiKwik, PhonePe and PayU have been growing faster and procuring growth capital.  

“Paytm itself used to attract large PE funds. The company has not raised money for some time and this has reflected in the PE/VC data,’ said an industry observer.

The fintech industry also has matured to some extent and the growth has moderated. The need for growth capital also has come down.  

In Q2 and H1 2019, even the Asia-Pacific fintech ecosystem was seen undergoing a significant downturn in volume, which fell largely due to the dramatic slide in early-stage VC investments. Overall geopolitical pressures and ongoing economic issues have made many investors, especially foreign, pause for a while.

Fintech investment in Asia dropped significantly in the first half of 2019 – reaching only $3.6 billion across 102 deals, a far cry from record investment seen in 2018. Mega-deals, which bolstered 2018 investment totals, took a pause in the first half of 2019.