FinTech funding in Asia-Pacific resilient despite global downturn: Report

High interest rates and the challenging global economy have failed to deter investors from backing regional financial technology firms, a new report has noted.

It found that FinTech startups in the Asia-Pacific raised US$1.9 billion (S$2.6 billion) in the three months to September 30, a slight decline from the US$1.91 billion recorded in the same period last year.

But the October 6 report from S&P Global Market Intelligence noted that global funding for FinTechs in the same quarter plunged 36 per cent to US$6 billion (S$8.25 billion), while deal numbers dived 39 per cent to 484 – levels not seen since 2021.

Global deals totalled US$29 billion (S$39.85 billion) in the first nine months of 2023, down from US$54 billion in 2022, while transaction numbers fell from 2,684 to 1,655.

Mr Sampath Sharma Nariyanuri, financial technology research analyst at S&P Global Market Intelligence, told The Straits Times that venture capital firms that bought stakes in FinTech startups at high valuations are now reassessing their risk tolerance amid macroeconomic headwinds.

He added that regional FinTech funding has remained resilient partly because venture capital firms are seeking to invest in “less crowded” parts of the world, where financial services are still inaccessible for large sections of the population.

“Further fuelling the VC (venture capital) interest is a favourable regulatory environment in several APAC (Asia-Pacific) countries, enabling tech startups to mediate financial services,” Mr Nariyanuri said.
 

FinTech startups in Singapore raised US$1.15 billion (S$1.58 billion) across 69 deals in the nine months to September 30, compared with US$1.77 billion (S$2.43 billion) in 92 deals in the same period in 2022.

Singapore, the United States, Britain, and India collectively accounted for more than half of global FinTech funding in the third quarter, with the Republic alone attracting US$300 million (S$412.26 million) across 24 deals.

Investors worldwide poured money into late-stage startups, putting US$2.56 billion (S$3.52 billion) in 44 deals of this nature in the third quarter, with the dollar value and transaction numbers both up around 30 per cent from a year earlier.

However, funding for seed-stage startups – those at a very early point of development – declined by 56 per cent, while investment in early-stage firms fell 64 per cent and that for growth-stage enterprises plunged 87 per cent.

The report also found that venture capital interest in artificial intelligence-enabled FinTech startups remained strong, with 38 deals worth US$696 million (S$956.43 million) recorded in the third quarter, compared with 60 deals worth US$1 billion (S$1.37 billion) in the first half of the year.

Mr Nariyanuri noted that it will be difficult for global FinTech funding to register growth in the next few quarters, but the size of funding rounds and startup valuations may rise.

“If valuations of public FinTech startups continue to improve and a few manage to go public, IPO (initial public offering) listings could revive the capital environment for startups,” he said.
 

Source: The Straits Times © SPH Media Limited. Permission required for reproduction.