As we start 2025, the fintech sector may see founders focus on business-to-business infrastructure solutions, safe credit products, second-order services on Digital Public Infrastructure (DPI), and the application of artificial intelligence in compliance and fraud detection.

If financial regulators come down on fintech firms in 2024 due to regulatory violations, industry sources said they will work on automating their compliance process in the coming months. This is critical for fintech firms because compliance is becoming a significant cost component for them.

"Leveraging AI-driven tools for real-time fraud detection and adaptive risk management will be key to preserving trust and strengthening the integrity of digital payments," according to Akash Sinha, Co-founder at Cashfree, a Bengaluru-based online payment aggregator.

Others predicted that AI would be increasingly employed to accelerate product delivery. While team sizes may not decrease significantly, productivity will increase as generative AI is widely employed in coding, marketing, and developing stronger sales pitches, among other things.

"A lot of the drudgery work will go away and marketing executives will get more time to focus on personalised client pitches, undertake aggressive marketing campaigns and speed up product delivery," said Harshil Mathur, Co-founder at Razorpay.

Venture investors, who have observed a significant slowdown in fintech investments over the previous two years, are hoping to see more early-stage businesses addressing difficulties like debt collection, underwriting, and developing creative DPI solutions. According to Venture Intelligence, approximately $1.4 billion was invested in the fintech sector in 2024, nearly the same as in 2023 but only about one-fourth as much as in 2022, when investments totaled USD 5.5 billion.

"I can see the space around DPI getting dense, more second order plays will emerge there and I am hoping to see more folks looking at secondary stake sales in a more consolidated fashion," says Varun Malhotra, partner at Quona Capital.

While the slowdown in consumer lending has caused many investors to avoid the sector, industry insiders believe credit will be the cornerstone. Business lending, secured credit, and supply chain finance are among the industries expected to draw venture capital, they said.

"We are actively looking at the trade credit space, B2B lending, and fintech infrastructure players, given the rapid digitisation of the economy; these sectors will see interesting credit disbursal models emerge in the coming years," said Sahil Gupta, partner at Sprout Venture Partners, a Bengaluru-based early-stage investor.

In 2024, players such as Vayana and Mintifi raised significant funds. According to Ramaswamy Iyer, Founder at Vayana, a trade finance startup, the sector is experiencing a number of tailwinds, including the digitization of business payments, large corporations opening up to partnering with new generation lenders, and the emergence of new direct-to-consumer brands.

"When businesses ran on paper, underwriting them was difficult. With digitalization, it is a lot easier, and with the emergence of ULI (Unified Lending Interface), Bharat Connect, and the NBFC-Account Aggregator piece, the sector is in a good situation," he said.

While the Indian startup environment remains active, creators in Southeast Asian (SEA) economies are aggressively developing enterprises centered on blockchain, artificial intelligence, and emerging financial services. Indian investors have noted that India appears to be underperforming in terms of the development of highly advanced disruptive concepts locally.

"When it comes to AI-in-fintech firms or blockchain initiatives, I'm seeing more clear ideas develop in other parts of Asia and the United States; Indian startups are primarily in the conceptual stage. I believe Indian entrepreneurs should come up with more disruptive ideas," said an Indian and SEA partner at an American venture capital firm.