Investors tighten purse strings: Fintech funding slumps 35% as early-stage deals take the biggest hit

Funding for fintech startups dropped by 35% to $366 million in the first quarter of the calendar year 2025, compared to $571 million during the same January–March period a year ago.

A recent Tracxn report on quarterly fintech funding in India revealed that the country ranked as the third highest-funded startup ecosystem globally, after the United States and the UK. On a quarterly basis, the total fintech funding was marginally lower than the previous quarter’s funding of $365 million in Q4 2024.

“After peaking in Q4 2021, the fintech funding has steadily declined, with minor spikes in Q1 2023 and Q3 2024. This decline can be attributed to several factors, including macroeconomic challenges and geopolitical headwinds. The Indian economy faced bearish stock trends, U.S.-imposed tariffs, global trade tensions, and rising inflation, discouraging venture capital inflows,” said the report.

Early-stage declines, late-stage funding remains resilient

Within the fintech sector, banking tech, internet-first insurance platforms, and investment tech emerged as the top-performing segments. Bengaluru led fintech funding in India, followed by Gurugram and Mumbai. Peak XV Partners, AngelList, and LetsVenture were among the leading investors in the sector.

As funding matures, a significant portion of the total capital was allocated to late-stage rounds. Early-stage funding was hit the hardest, seeing a 56% drop from year-ago levels. Only 10 companies secured first-time funding during this period, compared to 29 in the same quarter a year ago. Early-stage funding in Q1 CY25 stood at $92.6 million.

“As the FinTech landscape becomes more crowded, market saturation has intensified competition among startups, reducing returns on investment and making investors hesitant to commit funds to new ventures,” the report stated.

Seed-stage funding amounted to $45.9 million, down 39% from $75.5 million in Q1 2024 and 16% lower than the $54.6 million raised in Q4 2024. Late-stage funding also declined 21% year-on-year to $227 million from $286 million in Q1 2024. However, it rose 47% on a quarterly basis, compared to $154 million raised in the previous quarter.

Acquisition spree in fintech

The quarter witnessed ten acquisitions, marking a 67% and 100% increase compared to six and five acquisitions in Q1 2024 and Q4 2024, respectively. Notably, two of these acquisitions were valued at over $100 million. Magma General Insurance, a multi-category insurance provider, was acquired by DS Group and Patanjali Ayurved for $516 million. Axio, a Bengaluru-based online lending platform offering point-of-sale financing, was acquired by Amazon for $150 million.

In contrast, Q1 2025 did not see any funding rounds exceeding $100 million, unlike Q1 2024 and Q4 2024, which each recorded one such round.