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The next phase of Indias FinTech sector is expected to be driven by profitability, governance and resilience rather than access and scale, as funding increasingly shifts towards proven and scalable business models, according to a PwC report.
According to the report, Indias FinTech industry has shifted from focusing on growth and experimentation to prioritising profitability, governance and resilience. It noted, AI adoption is improving efficiency across financial services, however, most firms are yet to see measurable financial returns. At the same time, investors are increasingly favouring profitable and scalable business models over growth-driven experimentation, while trust, transparency and accountability are emerging as key priorities as financial services become more autonomous. While funding remains available, it is concentrating around proven categories, scalable operating models and businesses with clear paths to value creation, it noted. The report further highlighted that Indian FinTech companies raised a record USD 8.3 billion across 725 funding rounds in 2021, fuelling cashbacks, discounts, free products and the acquire now, monetise later model. Since then, seed funding for new and unproven ideas has declined, with capital increasingly shifting towards proven business models. Investors are no longer buying options on the future; they are buying evidence from the present. As a result, funding has become historically concentrated in lending and payments, which are favoured for their ability to deliver more predictable and stable returns. Meanwhile, the policy rate, which had peaked at 6.50 per cent, eased to 5.25 per cent by August 2026. However, lower rates have not revived the risk appetite seen in 2021, as concerns over lending quality have grown amid deterioration in unsecured retail credit. Unsecured personal loans and credit card borrowing grew at 22% and 25% CAGR respectively in the three years to FY24, then slowed by more than 10% in FY25 following an increase in risk weights on unsecured lending, which can now be seen being focused towards a cohort with robust credit scores, it noted. Overall, the report said the next phase of FinTech growth will be shaped less by access and scale and more by firms ability to turn intelligence into better decisions, build trust and achieve sustainable value creation. The opportunities ahead remain substantial, but the capabilities required to capture them are fundamentally different from those that defined the industrys first decade, it said. (ANI)
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