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As digital transactions grow, startups working on this space will get higher attention from investors.Reuters

Startups working on the financial services space are likely to get the highest attention from private equity (PE) and venture capital (VC) firms in the coming days as the Narendra Modi government takes concerted effort to push digital transactions.

With the ban of high value currencies, the government aims to make India a less cash economy with higher digital transactions. Analysts are of the opinion that these transactions are easy to monitor with less chances of tax evasion.

Financial technology companies, which offer hassle-free transaction experience, will definitely get more attention from private equity players, an industry source said.

The trend of betting big on fintech companies have been there for the past few years and this will get further fillip from the government's demonetisation move.

Some of the key players which are able to scale up rapidly due to higher external funding are Paytm, Freecharge, MobiKwik,, Lendingkart, PolicyBazaar, and Citrus Pay, among others.

Paytm, which has witnessed a huge surge in transactions post demonetisation, received around $700 million from SAIF Partners, Intel Capital and Alibaba backed Ant Financial Services Group in the recent past. Similarly, Freecharge has seen an investment of around $120 million from Hong Kong-based fund Tybourne Capital Management and Sequoia Capital, among others.

MobiKwik, another e-wallet service provider, has raised around $85 million as of now with major investment coming from Japan's payment gateway GMO, American Express, Sequoia, and Tree Line Asia, among others. Online marketplace for loans and insurance products, BankBazaar has raised around $60 million from Fidelity Growth Partners, Sequoia Capital and Amazon India, among others.

With the government's digitisation push, startups with new technology offerings in financial services space will definitely get a major boost apart from established firms. Interestingly, the growing rate of digital transactions has also generated interests from big firms with Reliance Jio entering the fray with JioMoney, which will be starting a merchant application next week.