Indian fintechs to face tough 2023, says Bain & Company

Bloomberg

India’s $50 billion fintech industry will face hurdles in the form of tougher regulatory scrutiny and tighter liquidity leading to higher cost of capital for some companies next year, Rakesh Pozhath, partner at consulting firm Bain & Company, said.
Investors into the country’s fintech space that has drawn heavyweights from Warren Buffett’s Berkshire Hathaway Inc to Masayoshi Son’s SoftBank Group Corp, in the past few years, are getting more diligent as global financial conditions tighten. That has intensified the competition for capital, Pozhath said.
“Investors are looking at bottomline and topline actual monetisation numbers and not just growth numbers in terms of number of customers, value of loans disbursed,” Pozhath, who has worked with global and Indian payment infrastructure providers, said.
“No one is underwriting those metrics anymore.”
That could result in a higher cost of capital for smaller fintech firms next year, as they aim to become non-banking companies to continue lending to customers, he said.
Indian fintechs, largely in the payments and lending space, have attracted roughly $35 billion in funding since 2000, and about $10 billion of it came in 2021, according to a recent report that was co-authored by Pozhath.