Despite the pandemic-induced disruptions, venture capital funds pumped $2.7 billion into domestic fintech companies in 2020, the second-highest fund infusion into the sector since 2019 when it had peaked at $3.5 billion, according to a report.
The biggest investments were into Bengaluru-based payments firm Navi Technologies at $397.9 million from angel funds, Noida-based Pine Labs attracted $300 million from private equity players, and Razorpay received $100 million from GIC of Singapore, Sequoia and others, making it a unicorn.
As against this, global fintech investments stood at a whopping $105 billion across 2,861 deals in the year, the third-highest annual total ever, as per the data collated by KPMG India.
Despite pandemic challenges, domestic fintech players attracted $2.7 billion in 2020, the second-highest after the 2019 peak of $3.5 billion, the report said, adding the year also saw the creation of a unicorn in Razorpay.
Payments remained the hottest area of investment, followed by tech-driven insurance firms and tech-driven wealth managers, the report said.
Competition in the insurance space started to heat up as incumbent insurers enhanced their digital focus due to the pandemic and niche payments players worked to expand into insurance, it added.
Sanjay Doshi of KPMG India said many domestic banks are now going down the digital path, creating a big growth area for investments as banking-as-a-service platforms.
He expects the fintech investment to remain robust in 2021 given the increase in demand for digital payments, contactless payments and e-commerce platforms. Investment by corporates is expected to be particularly strong as incumbent businesses continue to work to accelerate their digital transformation efforts.
In addition to payments and platform models, B2B solutions, including embedded finance and 'buy now, pay later' solutions, will likely be a hot investment area in 2021.
That apart blockchain is also expected to gain traction as blockchain-based solutions and digital asset offerings become more mainstream.