E-Payments: Funding challenge, tougher regulatory regime await FinTech startups 2023 –Report

*The continuing headwinds of the regulatory overhang on FinTechs, especially by the Reserve Bank of India, are being worsened by soaring inflation and looming threats of a global recession in several economies

Gbenga Kayode | ConsumerConnect

In the span of 365 days, the technology world went from euphoria to turbulence, be it in the stock markets or in the private funding space.

ConsumerConnect learnt the collapse of FTX and the cryptocurrency sector to the sale of Twitter to American billionaire businessman Elon Musk, globally technology industry news hogged the headlines through the past year.

In regard to a “tumultuous 2023” awaiting Financial Technology (FinTech) startups, ETtech report indicates the technology sector actually had a bumper 2021 owing to the pandemic-driven boom.

In the year under review, the digital platforms had offered various products and services, stock market listings of new-age firms, and big-ticket funding rounds, which led to a record number of unicorns being birthed in a single year.

However, 2022 had been a “reality check” after the euphoria of the previous year, according to report.

The startup funding winter triggered by the war between Russia and Ukraine along with rising interest rates in the United States (US) pushed the sector into trouble.

The situation was further exacerbated by soaring inflation and looming threats of a global recession in several economies around the world.

There is also a change being played out in India, and there is a list of ETtech’s top and exclusive technology and startup stories in 2022.

Edtechs account for 44 percent of layoffs in startup space this year

mass layoffs.

The ongoing ‘funding winter’ and business challenges faced by new age Internet companies have resulted in nearly 18,000 job losses so far this year, data compiled by executive search firm Longhouse Consulting showed.

In terms of the numbers, report said 52 startups fired 17,989 employees spread across edtech, consumer services, ecommerce, health tech, logistics, FinTech, enterprise technology, media and entertainment, agri-tech and cleantech.

startups hit hardest by layoffs

In regard to the FinTech space multiple founders and investors stated that the  operating environment is expected to get tougher for Indian FinTech startups 2023, amid a worsening funding winter and regulatory changes over the past few months.

Further still, there are continuing headwinds in respect of the regulatory overhang on FinTechs as the Reserve Bank of India (RBI) taking steps to regulate various aspects of the sector, investors are expected to remain selective in their approach, leading to potential consolidation in the coming months, sources said.

Funding challenge

According to data sourced from research firm Tracxn, funding in the Indian FinTech ecosystem almost halved to roughly $5.7 billion in 2022 from $10.3 billion in the previous year.

However, investments in Indian FinTech last year were still significantly higher than in 2020, when the sector garnered just $2.02 billion in equity funding, report noted.