Fintech funding tilts to software, infra amid regulatory tightening

Subscribe to enjoy similar stories.Early-stage fintech investors in India are shifting away from consumer-facing models that are heavily regulated and pivoting to software and infrastructure businesses that promise steady growth with minimal policy risk.Funds are increasingly backing software, infrastructure and B2B fintech models with AI that are less exposed to regulatory shocks, experts said.The shift follows a reset between 2021 and 2025, when tighter rules on digital lending, first-loss default guarantees and data governance curbed growth and raised compliance costs, pushing investors to favour B2B models over balance-sheet lenders.Data from Tracxn over the last 24 months showed that investors are becoming more selective within fintech, with capital moving toward software and infrastructure layers rather than large consumer-facing models.Funding picked up in areas such as payments infrastructure, which more than doubled, wealth-tech management platforms, which rose sharply by up to four times, and software tools for fund managers, where investments increased nearly eight-fold.In contrast, investor interest cooled in consumer payments, which fell about 60%, online lending, down roughly 16%, and online trading platforms, where funding more than halved over the same period.“Consumer fintech is crowded and heavily regulated and as a fund we don’t see too many white spaces,” said Sahil Anand, founder and managing partner at Cedar Hill Capital, a new fintech fund.While private equity and venture capital investors are not abandoning lending or regulated fintech in the growth to late stages, those bets have become selective, favouring scaled, profitable firms.Investors have become selective towards firms that have adapted