The financial services sector in India, explained

What is fintech in India?

Fintech is short for financial technology: companies that offer financial services through apps, websites and software instead of branches and paperwork. In India that covers paying a shopkeeper with a phone, getting a small loan in minutes, buying a term insurance policy online, or opening a share trading account without visiting an office.

Most Indian fintech startups do not behave like banks. A bank takes deposits and is allowed to lend them out. A fintech usually does one narrow job very well, such as collecting payments for online shops, and then partners with a bank or a licensed lender for the parts that need a licence. Some do become regulated lenders, insurers or brokers themselves, and then they follow the same rules as older firms.

StopDown groups the sector into five sub-sectors: payments and infrastructure, lending and credit, insurtech, wealthtech and investing, and banking infrastructure and neobanking. Well-known names in StopDown's data include PhonePe, Paytm, Razorpay, Pine Labs, Groww, Zerodha, PB Fintech, Kissht, Moneyview, Navi, Zaggle and MobiKwik.

How did fintech grow so fast in India?

India built public digital rails first, and startups built products on top. This is the main reason fintech grew faster here than in most countries of a similar income level.

Three things came together. First, the Jan Dhan Yojana, launched in 2014, pushed hundreds of millions of people to open basic bank accounts. Second, Aadhaar, the national ID, let a person prove who they are with a fingerprint or a one-time password. That made electronic KYC (know your customer, the identity check every financial firm must do) cheap and quick. Third, a mobile phone with a data connection became affordable for most households.

Then came the payments layer. The National Payments Corporation of India (NPCI), a body set up by the RBI and banks, launched UPI in 2016. UPI, the Unified Payments Interface, lets anyone send money from one bank account to another with a phone, through any app, and the money moves in seconds. Because it works across apps and banks, a new startup could offer payments on day one without building its own network.

The group of public tools, including Aadhaar sign-in, e-KYC, e-sign, DigiLocker (a government store for digital documents) and UPI, is often called India Stack. The later addition of the account aggregator framework let people share their bank and other financial data with a lender or adviser by giving consent, instead of uploading PDF statements.

The November 2016 move to withdraw high-value notes and the Covid-19 years from 2020 pushed more shops and households to try digital payments, and many stayed.

Who are the customers?

There are two groups of customers, and fintech startups often serve both: consumers and businesses.

On the consumer side, the biggest group is people who already have a bank account and a smartphone but little access to credit or investment products. Many are first-time borrowers with no credit history, salaried workers in smaller cities, gig workers and young people opening their first demat account (an account that holds shares in electronic form). Apps such as Groww and Zerodha grew by serving these first-time investors, and lenders such as Kissht and Moneyview built products for borrowers that banks found hard to assess.

On the business side, the customers are small shops, online sellers, large merchants and other companies. A business needs to accept payments, pay suppliers and staff, manage expenses and borrow for working capital. Razorpay and Pine Labs serve merchants. Zaggle sells spend management and rewards tools to companies.

A third group is other financial firms. Many fintech startups sell software, data or APIs (a way for one program to talk to another) to banks and insurers. This is the plumbing side of the sector, and it is where customers are fewer but contracts are larger.

How the sector is organised: from customer to regulator

Money services in India run as a chain, and each link has its own rules. At one end is the customer. Next comes the app, then a payment or technology partner, then the licensed institution such as a bank, a non-banking financial company (NBFC), an insurer or a broker. At the end sits the regulator.

The regulator depends on the product. The Reserve Bank of India (RBI) supervises payments, banks and NBFCs. The Insurance Regulatory and Development Authority of India (IRDAI) covers insurance. The Securities and Exchange Board of India (SEBI) covers stock brokers, mutual fund distribution and investment advisers. Because one startup can touch all three, a single product can answer to more than one regulator.

A startup chooses how much of this chain to own. Owning a licence gives more control and a bigger share of the money, but it also brings capital requirements, audits and reporting. Renting a licence from a partner is faster, but the partner keeps part of the earnings and can change terms.

Business models: how fintech companies make money

Fintech companies earn in a handful of ways, and most use more than one. The common ones are fees on each transaction, interest, commission for selling someone else's product, subscriptions for software, and interchange or float income.

Payment companies charge merchants a small percentage on each payment, called the merchant discount rate (MDR). Lenders earn interest and processing fees, and pay for defaults and the cost of funds. Insurance platforms earn a commission from insurers when a policy is sold, and often a renewal commission later. Broking and investing apps earn brokerage, account fees, interest on margin funding, and commission from mutual fund and other product distribution. Software and infrastructure firms charge licence or usage fees.

Some are marketplaces that connect many lenders or insurers with a customer. PB Fintech, which runs an online insurance and lending marketplace, is a listed example in StopDown's data.

• Transaction fee: a small cut of every payment or trade.
• Interest income: the gap between what a lender pays for money and what it charges.
• Distribution commission: paid by an insurer, lender or fund house for finding a customer.
• Software or subscription fee: charged to businesses and banks for tools.
• Float and interest on balances: earned on money that sits with the company for a short time.

How the money is actually made, and where it is lost

Fintech margins are thin, and the winners are often the ones that control their costs and risks. Payments is a high-volume, low-margin business. When a customer pays with a debit card or UPI, the merchant is charged little or nothing, and the cost of running the system has to be recovered elsewhere. Many payment firms now make money on add-ons such as lending, software for merchants, or card terminals.

Lending earns more per customer but carries the biggest risk. A lender must provide for loans that are not repaid. Unsecured loans, where there is no asset to take back, have the highest losses. In 2023 the RBI made banks hold more capital against unsecured consumer loans and loans to NBFCs, which pushed the cost of funding up for some lenders. Stronger lenders adjusted their book, and weaker ones slowed down.

Investing apps earn more when markets are active. Trading volumes rise and fall with markets, so income can swing from quarter to quarter. Regulation also matters here: SEBI tightened rules on index futures and options trading in 2024, which affected how much active traders could trade and therefore how much brokers earned.

Across the sector, the cost of getting a new customer matters as much as the revenue per customer. A product that costs ₹800 to sign up a customer and earns ₹300 a year will not make money unless the customer stays for years or buys more products. This is why many fintechs push cross-selling: a payments user gets offered a loan, then an insurance policy, then an investment product.

Profitability has become a theme. A recent headline on StopDown noted that Juspay, a payments technology company, reported revenue of ₹664 Cr but slipped into a loss, a reminder that growing revenue is not the same as earning profit.

Who funds fintech?

Fintech has been one of the largest destinations for venture funding in India, and the investors range from early-stage funds to global crossover and growth funds. In StopDown's data, the most active names in the past 12 months in this sector include Peak XV Partners, Accel, Prosus, Lightspeed, Z47, 3one4 Capital, Alteria Capital, Elevation Capital, FMO and Blume Ventures.

Not all of them write the same kind of cheque. Alteria Capital is known as a venture debt lender, which means it lends to startups instead of buying shares. FMO, the Dutch development bank, and LeapFrog, an impact investor, appeared together in a recent StopDown headline about NeoGrowth, a lender to small businesses, raising ₹85 Cr. Lenders also need debt to lend on, so credit funds matter: another recent headline says Vivriti is aiming for a first close of ₹2,500 Cr on a credit fund.

Two kinds of money are needed in lending: equity, which absorbs losses, and debt, which funds the loan book. A startup with only equity can lend only a little. A startup with lots of debt but little equity is fragile if defaults rise.

What is changing in 2026?

The rules are getting stricter and the sector is maturing, as of October 2026. Four changes stand out.

First, payment companies face a tighter licensing regime. The RBI issued new directions for payment aggregators on 15 September 2025. A non-bank payment aggregator needs a net worth of ₹15 crore when it applies and ₹25 crore by the end of the third financial year after being authorised. Check the RBI text for the exact dates that apply to firms already in business.

Second, digital lending is more tightly governed. The RBI's Digital Lending Directions, 2025, in force from May 2025, require lenders to show borrowers a key fact statement with the true cost of the loan, send loan money straight to the borrower's bank account, and take responsibility for the apps and partners they use.

Third, who pays for UPI is being debated again. UPI has been free for merchants on most payments since a zero-MDR policy in January 2020, and the cost has been borne by the government and the system. In 2026 the government has announced plans for a small fee on some larger merchant payments while keeping person-to-person transfers and small merchants free. The details have moved several times, so check NPCI and Finance Ministry notices for the current position.

Fourth, insurance is opening up. In December 2025 Parliament passed a law that raises the foreign ownership limit for Indian insurers to 100 per cent, which could bring in more capital and new entrants.

Beyond the rules, the direction of travel is towards fewer, larger platforms that offer several products, and towards profit rather than growth alone. Several well-known firms are now listed on the stock exchanges, so their results are public. Recent StopDown headlines also mention Groww adding 1 lakh active clients in a month and Neokred widening a bank programme for UPI and card acquiring.

How to read a fintech story

When you read news about a fintech company, ask four questions. What does it sell and to whom? Which licence does it hold, or whose licence is it using? How does it make money on each customer? And what happens to it if the rules change?

A company with its own licence has more control but more compliance cost. A company that depends on a partner bank can be hit if that partner is restricted by the regulator. A lender should be judged on how many of its loans are repaid, not only on how many it makes. An investing app should be judged on whether it earns when markets are quiet. This page is for general learning and is not investment, legal or tax advice.

The breakdown

Value chain: who does what, who earns

Business models

The numbers that matter

• Take rate: the share of each rupee processed that the company keeps. In payments it is very small, so volume has to be large.
• Cost of funds: what a lender pays to borrow the money it lends. A rise in this cost can erase a lender's margin.
• Credit loss: the share of loans that are not repaid. In unsecured lending this is the number that decides who survives.
• Customer acquisition cost against lifetime value: how much it costs to win a customer against how much they earn over the years.
• Active customers and repeat use: a download is not a customer. Monthly active users and repeat transactions show real demand.
• Regulatory capital: the minimum owned money a licensed firm must keep, which limits how fast it can grow.

Rules and regulators

Risks

• Regulatory action can stop a product at short notice, as happened to a few payment and lending firms in past years.
• Dependence on one partner bank or one rail such as UPI can hurt if the partner or the rule changes.
• Loan losses rise quickly when borrowers are over-extended, especially in unsecured credit.
• Fraud, data leaks and cyber attacks damage trust, which is the main asset of a financial firm.
• Thin margins mean growth without profit can run out of money before scale arrives.
• Customers in trading apps can lose money, and regulators watch how products are sold to them.

What to watch

• The final shape of UPI merchant fees and any limit on one app's share of UPI volume.
• How the new payment aggregator rules shake out among smaller gateways.
• Whether the 100 per cent foreign ownership limit in insurance brings new entrants.
• Growth of lending using account aggregator data and of credit funds that supply loan money.
• Profitability and listings: how many large fintechs reach steady profit after listing.
• AI used in credit decisions, customer service and fraud checks, and how regulators respond.

Inside the sector

• Payments & infrastructure: Payments and infrastructure companies move money for people and businesses and build the software that lets others do the same. It is the largest part of Indian fintech by volume and the thinnest by margin.
• Lending & credit: Lending startups use apps and data to decide who can borrow and how much, but the loan itself usually comes from a bank or a licensed non-bank lender. Credit is the highest-earning and highest-risk corner of fintech.
• Insurtech: Insurtech means startups that sell or run insurance using technology. Most Indian insurtechs sell other companies' policies online and earn a commission, while a few build tools for insurers.
• Wealthtech & investing: Wealthtech startups help people buy shares, mutual funds and other investments through an app. They earn brokerage, fees and commission, and answer mainly to SEBI.
• Banking infrastructure & neobanking: Neobanks are apps that offer banking services but usually run on a licensed bank's licence. Banking infrastructure companies build the software that lets banks and other firms offer those services.

Financial Services: latest on StopDown

• Juspay revenue rises to ₹664 Cr, slips into loss 9 October 2026
• Krasha plans litigation finance platform 9 October 2026
• NeoGrowth raises ₹85 Cr from FMO, LeapFrog 9 October 2026
• Vivriti targets first close of ₹2,500 Cr credit fund 9 October 2026
• WazirX futures volume jumps 236% in quarter 9 October 2026
• Groww adds 1 lakh active clients in September 8 October 2026
• Neokred widens bank programme for UPI and card acquiring 8 October 2026
• PhonePe partners DPCGC on OTT compliance 8 October 2026

Every Financial Services story →

Most active investors here

1. Peak XV Partners (9 rounds)
2. Accel (8 rounds)
3. 3one4 Capital (6 rounds)
4. Lightspeed (6 rounds)
5. Prosus (6 rounds)
6. Z47 (6 rounds)
7. Alteria Capital (5 rounds)
8. Elevation Capital (5 rounds)

Rounds StopDown covered in the last 12 months. Activity is not a measure of quality.