Fintech deals hit 5-year high in S'pore; growing interest in crypto: KPMG report

SINGAPORE - The financial technology sector here saw deals hit a five-year high last year as interest in blockchain and cryptocurrencies surged, according to a new report by professional services firm KPMG released on Tuesday (Feb 8).

A total of 191 deals were transacted last year, with a total transaction value of US$3.94 billion (S$5.29 billion) across venture capital, private equity, and merger and acquisitions.

This is an increase from the 139 deals worth US$2.48 billion that were closed in 2020, and the 100 deals in 2019.

In total, global fintech funding across merger and acquisitions, private equity and venture capital reached US$210 billion across a record 5,684 deals in 2021.

One significant deal involved Grab, which listed on Nasdaq via the world's largest special purpose acquisition company (SPAC) deal worth US$40 billion.

This made it one of the top four fintech investments in the Asia-Pacific region in 2021.

KPMG International global fintech leader Anton Ruddenklau, who is based in Singapore, said: "2021 has been an incredibly strong year for the fintech market globally, with the number of deals soaring to record highs across the board.

"We're seeing an incredible amount of interest in all manner of fintech companies, with record funding in areas like blockchain and cryptocurrencies, cyber security, and wealth-tech. While payments remain a significant driver of fintech activity, the sector is broadening every day."

Funding for cryptocurrencies and blockchain accounted for nearly half of the total value raised by Singapore fintech firms last year, with 82 deals worth US$1.48billion, the report noted.

This means that this emerging field has taken over payments as the top fintech area funded locally.

"The surging investment and deal activity reflects growing recognition for the potential role of cryptocurrencies and its underlying technologies in modern financial systems," KPMG said in a media release.

"The majority of the cryptocurrency and blockchain deals for Singapore in 2021 went towards software and underlying infrastructure, rather than services," it added.

Globally, investments in cryptocurrency and blockchain also rose dramatically, KPMG said, with US$30 billion of funding channelled to that space last year, a huge jump from the US$5.4 billion in 2020.

The number of deals rose from 627 to 1,332 over the same period.

Mr Ruddenklau said this was expected to remain a hot area of investment in 2022 as well, with more firms looking to regulators to provide clear guidance on such activities to help develop the space.

"In Singapore, the surge in investments into cryptocurrency and blockchain has also outpaced that of payments, which long held the top spot here," he said.

"Given how many banks are beginning to see the major limitations inherent in their legacy architecture and technologies, we are also expecting a surge in investment into banking replacements able to help them rethink core banking services."

KPMG also observed that cryptocurrencies are expected to continue receiving attention from Singapore regulators, as they try to balance innovation with the associated risks.

It said: "This will include considerations on how infrastructure can be secured to protect the large amount of capital deployed in the cryptocurrency market, even as service providers aim to scale and innovate to attract more consumers into this market."

The Monetary Authority of Singapore (MAS) issued guidelines last month to discourage cryptocurrency trading by the public here.

It said that cryptocurrency service providers should not market or advertise their services in public areas in Singapore, such as through advertisements on public transport, public transport venues, public websites, social media platforms, and broadcast and print media.

This is because the trading of cryptocurrencies is highly risky and not suitable for the public, with the prices subject to sharp speculative swings, MAS said.