Today, the fintech ecosystem in India is experiencing a more advanced stage and the startups are now focused on driving sustainable revenue, operational efficiency and profit. It is an evolution of a sector which invested heavily in scale over the last 10 years. Companies developed massive customer bases, grew payment quantities and invested heavily to acquire merchants and users. What investors and markets are looking for these days is more elemental — a viable business model that can make a profit that will last.
The change is reflected in the recent financial results. India’s fintech industry has flipped to profitability on the consolidated level for the first time in FY25 with net profit of c ₹2,300 crore and cumulative revenue of c ₹1 lakh crore, says Jefferies. Wealth-tech had a major portion of the sector’s profit pool, while payments continued to be the largest revenue driver. This trend has persisted in FY26, with some companies still making strong profits while others continue to struggle. This course takes students from the Growth at Any Cost paradigm to Sustainable Growth.
For a long time, the growth of fintech startups was measured based on several parameters including registered users, monthly transactions, payment volume, and loan disbursements. The assumption was that this would eventually lead to monetisation as a result of the massive scale. This is not the path that is going to continue. Investors are looking at customer acquisition costs, contribution margin, repeat usage, credit quality, operating expense and cash generation.
A new shift is also reflected in the IPO pipeline as emerging fintechs are being closely examined for their ability to generate sustainable profits instead of just achieving rapid growth. The change has also driven a re-thinking of business models among the fintech companies. Payments are no longer sufficient, we need to build a relationship. Although UPI has driven a great deal of volumes in India, the payments space has traditionally not provided many direct monetisation avenues.
Payments are becoming an effective tool for the fintech industry to acquire and distribute other financial services. Insurance, lending, wealth management, credit cards, merchant services and financial products offer other sources of income and the opportunity for companies to strengthen ties with their current customers. This strategy is especially crucial given the high level of competition in the digital payments landscape. There’s a shift from asking about the number of transactions a platform can handle to asking how much each customer and merchant brings in terms of revenue and profit.
Profitability Through Diversification
Diversification is probably the next phase in the evolution of fintech. Businesses, which started their existence with a single product, are moving into a wider financial world. This allows them to upsell users with more than one product instead of constantly investing in new users. This can lead to an increase in the customer’s lifetime value and a less reliance on costly marketing efforts. The following are examples of this transition in the numbers from FY26.
Paytm’s revenue rose 22.3% to ₹8,437 crore in the full year while its net profit stood at ₹552 crore, which is a turnover compared with a loss of ₹663 crore in the prior fiscal year. Pine Labs too became profitable with a net profit of ₹112.5 crore. The overall industry continues to be mixed. For instance, even as PhonePe’s revenue increased, it continued to shed money, highlighting the fact that no gains are guaranteed with scale.
The profitability test for lenders is different. Profitability is not just about growth in revenue in the credit segment of the digital lending business. The cost of credit, asset quality and default, and collection efficiency have all become important. A growing loan book might be producing terrific top-line growth, but may also be leading to significant losses when standards slip. As a result, investors have come to focus more on such indicators as gross non-performing assets, credit costs, return on assets and return on equity. Another indicator of the shift in the growth narrative of fintech from technology to financial services businesses.
After IPOs raise the stakes.After IPOs, raise the stakes. It is in the public markets that this new breed of fintech companies is gaining an increasing trial of strength. There are a number of fintech companies in the process or contemplating going public—with different expectations placed in the stock market than the initial crop of tech stocks. Investors are seeking transparency in the path to profitability, better governance, discipline in spending and regular income streams.
A few names like Fibe, Moneyview, Navi and KreditBee have started to be a part of the emerging IPO pipeline while PhonePe is also said to be mulling over the listing plans. According to the industry observers, the pipeline now has a more disciplined approach than that of the 2021 fintech IPO wave, and is focused more on balance sheets and earnings.
The Road Ahead
The opportunity continues to be huge in India’s fintech space. New businesses are still being created, with a growing level of digital adoption, UPI, increasing internet penetration, formalisation of financial services, and increasing demand for digital credit and investment products. However, success is defined differently these days. The future of fintech entrepreneurs could not be more different than the current market’s biggest players or most transactions. On the contrary, they may be the businesses that are able to turn digital scale into recurring income, operations that are efficient, and profits that are sustainable.
This shift appears to be happening already, as the FY26 numbers indicate. There are a number of fintech companies that have either reported profits or dramatically cut losses, while some remain to invest more in the future. The next stage in the evolution of India’s fintech sector could, therefore, be more about ‘how fast companies can grow’, rather than ‘how efficient they can grow’. The profitability era has started, but the challenge will be if the fintech companies can keep that profit going and continue to be innovative in one of the world’s most competitive digital financial markets.
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