Profitability, governance to define India's next FinTech phase: report

India's FinTech sector is entering a phase where profitability, governance and resilience matter more than access and scale, as investors direct capital towards business models with demonstrated and scalable returns, according to a PwC report.

The report traces the change to the funding boom of 2021, when Indian FinTech companies raised a record USD 8.3 billion across 725 rounds. That capital financed cashbacks, discounts and free products under an "acquire now, monetise later" approach. Seed funding for new and unproven ideas has since declined, with money moving towards established categories.

Lending and payments have emerged as the preferred segments because they offer more predictable and stable returns. The report notes that investors are no longer backing future possibilities but are instead seeking evidence of present performance, leading to a historically concentrated flow of funds.

Artificial intelligence is improving efficiency across financial services, but most firms are yet to record measurable financial returns from it. As financial services become more autonomous, trust, transparency and accountability are gaining importance.

On the macroeconomic side, the policy rate eased to 5.25 per cent by August 2026 from a peak of 6.50 per cent. The softer rate environment has not restored the risk appetite seen in 2021, as concerns over lending quality have grown amid deteriorating unsecured retail credit.

Unsecured personal loans and credit card borrowing expanded at a compound annual growth rate of 22 per cent and 25 per cent respectively in the three years to FY24, before slowing by more than 10 per cent in FY25. The slowdown followed an increase in risk weights on unsecured lending, with lending now increasingly focused on borrowers with robust credit scores.

The report concludes that the next stage of FinTech growth will depend less on access and scale and more on a firm's ability to convert intelligence into better decisions, build trust and create sustainable value. The opportunities remain substantial, it adds, but the capabilities needed to capture them differ fundamentally from those that shaped the industry's first decade.