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

SINGAPORE – 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 start-ups in the Asia-Pacific raised US$1.9 billion (S$2.6 billion) in the three months to Sept 30, a slight decline from the US$1.91 billion recorded in the same period last year.

But the Oct 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, while deal numbers dived 39 per cent to 484 – levels not seen since 2021.

Global deals totalled US$29 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 start-ups 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 start-ups to mediate financial services,” Mr Nariyanuri said.

Fintech start-ups in Singapore raised US$1.15 billion across 69 deals in the nine months to Sept 30 compared with US$1.77 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 across 24 deals.

Investors worldwide poured money into late-stage start-ups, putting US$2.56 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 start-ups – 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 start-ups remained strong, with 38 deals worth US$696 million recorded in the third quarter, compared with 60 deals worth US$1 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 start-up valuations may rise.

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