'If you were in Bangalore trying to raise money...': Zerodha's Nikhil Kamath explains the 'bad' time for fintech companies

Nikhil Kamath, Chief Investment Officer of stock broking platform Zerodha believes that fintech companies are going through a bad phase right now and funding for the sector has also significantly reduced.

The problems faced by the fintech sector

While speaking at the India Global Forum, Kamath explained, “I'll be candid about this, fintech is having a bad moment. Especially in India if you are a fintech company today compared to say two years ago, access to Capital has gotten significantly harder.”

Why is investor interest low?

The CIO of the trading platform noted that the biggest issue faced by the fintech sector is the lack of adoption by users, which has significantly dampened the investor interest.

“The story on the ground is this way could be in big part because people overestimated how quickly adoption will happen for fintech products in India,” Kamath said.

Funding woes

He adds that the check size for fintech startups seeking funding has got reduced by as much as one fourth of what they could raise a few years ago.

“If you were in Bangalore trying to raise money for a fintech company today, if you got a Series A check which was X one year ago, today you will probably get 0.25X,” the CIO of the broking platform noted.

The funding woes are not just limited to India. As per data from S&P Global, venture capital flows into fintech companies plunged globally by 36 per cent year over year to $6 billion in the third quarter of 2023. Funding deal volumes dropped 39 per cent to 484 transactions.

Which fintech startups are doing better?

Kamath also added that adoption in the lending space  is better as compared to others within fintech.

“Most people who are able to do okay in fintech today seem to be the guys who are lending,” he said.

Long term view

Despite the current difficulties faced by the sector, Kamath is optimistic about fintech in the long run owing to the size of the Indian markets.

He noted, “I hope all of that changes and in my opinion India is a large market and with time adoption will pick up uh but yeah I think it's a tough time like I don't know how else to put this.”