Fintech funding sees modest rise in CY25 as investor outlook turns cautious

Fintech funding rose slightly to $2.4 billion in CY25, but geopolitical tensions in West Asia may slow investment flows as venture capital investors turn cautious about deploying capital

Fintechs are likely to face some pain on the funding front over the near future with the West Asia crisis taking a toll.

 

Data for the calendar year (CY) 2025 on fintech funding from Tracxn Technologies — a data intelligence platform for private market research — showed a slight uptick over CY24. A sum of $2.4 billion was raised in CY25, a rise of 2 per cent over CY24, and flat compared to CY23.

 

Seed-stage funding at $177 million in CY25 is a drop of 40 per cent compared to CY24, and lower by 30 per cent over CY23. Early-stage funding of $1.2 billion during this period is a rise of 78 per cent over CY24, and up by 56 per cent over CY23. But late-stage funding at $1 billion in CY25 was lower by 26 per cent over both CY24 and CY23.

 

How could the West Asia crisis affect fintech funding?

 

“Geopolitical tensions in West Asia can influence funding flows into Indian fintechs, though the effect is largely indirect. Venture capital funds typically already have committed capital — funds that their investors have set aside specifically for venture investments — so this money cannot easily move into other assets,” said Rohan Lakhaiyar, partner (financial services risk advisory), Grant Thornton Bharat.

 

Therefore, he points out, "The issue is not capital leaving the fintech ecosystem, but investors becoming more cautious about deploying it."

 

Why are fintech lending volumes still rising?

 

This development comes even as personal loans given by fintechs continue to grow. Data from the Fintech Association for Consumer Empowerment (FACE) shows an expansion both in scale and value in H1FY26 over the same period in FY25. Volumes grew to 6.4 crore accounts from 5.9 crore; value was up at ₹97,381 crore (Rs 78,084 crore); ticket sizes were higher at ₹15,177 (₹13,327).

 

It is felt that in the near term - which is typically the next six months - funding activity may slow as investors reassess risk. If the conflict leads to sustained higher energy prices, India could face inflationary pressures, which may reduce consumption and tighten liquidity for Indian consumers. For fintechs, this could mean higher credit risk for lending platforms, slower growth in digital payments linked to consumption, and weaker activity on brokerage platforms during periods of market volatility. Cross-border payment firms may also see some volatility in transaction volumes if remittance flows from the Gulf region fluctuate or currency volatility increases.

 

Will fintechs with strong business models still attract capital?

 

“As I see it, the cycles are getting shorter. What used to be a few years will now be spread over a few months. There will be enhanced filtering by investors. But that said, those fintechs with good business models and a clear path to profitability will not find funding to be an issue,” said Navin Surya, co-founder, Beams Fintech Fund.

 

A relief for fintechs is the fact that co-lending has grown significantly in the last couple of years, with larger incumbent non-banking financial companies and banks taking 80 per cent of the loan and the balance funded by fintechs, limiting capital requirements. Closer engagement with Mint Road has also helped - the banking regulator has held nearly 500 meetings with fintech firms. Reserve Bank of India (RBI) Governor Malhotra pointed out at the Global Fintech Fest 2025, since March 2024: “We have conducted 15 structured sessions under Finteract, covering over 1,100 fintech representatives. In addition, 14 open interactions with more than 600 participants have been held under Finquiry since June 2024”.

 

What is the medium-term outlook for fintech funding?

 

Looking ahead, fintechs are on a strong footing — clear-eyed, focused and wiser about their role and symbiotic relationship with the regulated financial sector ecosystem. “This is enabling collaboration and competition, combining strengths and cancelling weaknesses,” said Sugandh Saxena, chief executive officer, FACE. The self-regulatory organisation for fintech has brought the industry to a common front to share and address issues adeptly and represent its voice effectively.

 

“All told, fintechs are in a good place to count their success by delivering consistent, improved customer outcomes,” she added.

 

As Lakhaiyar sees it, in the medium term (6–12 months), the outcome on funding will depend on how the West Asia conflict evolves. If tensions remain contained, the slowdown in funding will likely be temporary and investor activity could stabilise after a few quarters. However, if instability continues and energy prices remain elevated, inflation and liquidity pressures could persist.

 

“In such an environment, investors are likely to deploy already raised capital towards fintech firms with stronger balance sheets and stable revenue streams,” he said. Over the long term, venture capitalists could face difficulty in raising India-focused fresh funds if global geopolitical tensions continue. While existing funds can continue deploying committed capital, new fund raises may slow as limited partners become more cautious.

 

What may unfold could resemble what Coatue (run by hedge fund and portfolio manager Philippe Laffont) noted in its report Fintech and the pursuit of prize: who stands to win over the decade (October 2022). It stated that “the next generation of enduring fintech requires a focus on owning the balance sheet, maniacal re-bundling, a business-to-business leaning, and building high-margin sub-verticals.”

 

Highlight points

• $2.4 billion raised by fintechs in CY25, a rise of 2 per cent over CY24
• Seed-stage funding of $177 million in CY25 marked a drop of 40 per cent compared to CY24
• Early-stage funding at $1.2 billion up 78 per cent over CY24
• Late-stage funding at $1 billion in CY25 lower by 26 per cent over CY24