Fintech firms in India have been reeling under the supreme court’s directive in September 2018 that struck down the use of the biometric-based Aadhaar database. With mandatory KYC requirements, fintech firms are now forced to look for alternative ways to onboard users, shooting up overhead expenses. The industry is awaiting final directions from the central bank regarding alternative mode of authentication now that eKYC is not acceptable.
In 2018, the sector attracted $1.7 billion in investments, far lower than the $4.3 billion it had received in 2017, according to a report by consultancy KPMG. This was in contrast to the global trend. Worldwide, investments across mergers and acquisitions, private equity and venture capital funding in fintech more than doubled to $111.8 billion in 2018.
In a separate analysis by media outlet Asian Age, industry experts said that one reason for the decline in the investment value last year was the high base of 2017. The one-off investment in Paytm alone ($1.4 billion) had pushed the deal activity to a high level. However, overall the growth trajectory in the sector is intact and funding demand is robust. India has a large untapped market for fintech startups, as 40% of the population is still unbanked and 87% of payments is made in cash.