Cashless is ominous truth for fintech start-ups

As per the report, funding in the fintech space has dropped by 58.4% this year. (Representative Image: Reuters)

Even as the government’s demonetisation scheme seems to have benefited fintech start-ups, especially those in the business of digital payment services, investors still remain wary when it comes to infusing fresh cash, reports fe Bureau in New Delhi. “The pulse of fintech”, a report on investment activity in fintech by audit firm KPMG, shows that only $219 million has been invested in the space in 2016-17, compared with $1.6 billion the previous year, recording a 86% drop. As per the report, the decrease in investment is due to lack of mega deals.

Similarly, research firm Tracxn Technologies’ data show a similar trend. As per the report, funding in the fintech space has dropped by 58.4% this year. Just $488.85 million has found its way into fintech businesses, down from $1.2 billion in 2015.

While more money came into ventures at the seed stage, all other segments pulled in less than they did last year. For example, in 2016, investment at the angel round went up by 57% at $9.39 million from $6.11 million in 2015. The major impact was felt at the mature round of funding, especially at Series C and D, respectively. For instance, in 2016, funding at the Series C level dropped by 61% to $105 million from $267.50 million in 2015.

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Likewise, funding dropped by 70% at the Series D level to $72.38 million in 2016 from $240 million in 2015.

Moreover, unlike 2015, when the fintech industry witnessed an investment of $500 million at the Series E level, last year the round did not find any fresh investor. Instead, in 2016, fintech start-ups were able to raise only $60 million in Series F round.

“Clearly, fintech is not only about digital payment services. However, there are regulatory challenges involved in this sector and the first generation of fintech start-ups have already managed to raise seed fund. With greater action and growth, we will in the next 6-12 months see these companies raising fresh fund at Series A and B level,” said Ashish Fafadia, CFO, Blume Venture Advisors. The firm has invested in both Slice Pay, a digital payment platform for college students, and Chillr app, a multi-bank mobile banking app.