Asia-Pacific sees fintech investments climb in H1’22, despite drop in global figures: KPMG report

 

Asia-Pacific has seen a record $41.8 billion investments in fintech during H1’22, revealed KPMG's latest Pulse of Fintech report. In comparison, the global investments in fintech dipped to $107.8 billion. The report also revealed that the payments sector received the bulk of investments and raked in $14.2 billion, followed by crypto and blockchain.

According to the report, global fintech investments dropped from $111.2 billion in H2’21, with 2,980 deals signed in H1’22. These investments include private equity, venture capital and merger and acquisition deals.

Anton Ruddenklau, Global Head of Financial Services Innovation and Fintech, KPMG International, said: “2021 was a banner year for the fintech market globally, which makes the first half of 2022 seem slow by comparison.”

“But in reality, many sectors within the fintech market have shown strength and resilience. While the fintech market will likely be quite challenged in H2’22 due to global uncertainty and broader economic concerns, fintechs will likely continue to attract significant attention and investment - if at lower levels than last year,” Ruddenklau further added.

Asia-Pacific's investments had more than doubled in H1’22, up from $19,2 billion in H2’21. This is mostly because of Block's $27.9 billion acquisition of Australian buy now, pay later (BNPL) services provider Afterpay, revealed the report.

The region, apart from Australian firm Afterpay, saw merger deals from KKR's $2.1 billion buyout of Yayoi, a financial software vendor in Japan, and the $1 billion from the merger of Superhero and Swiftx in Australia.

On the other hand, the US saw overall investments of $39.4 billion in H1’22, down from $59.7 billion in H2’21. Europe, the Middle East and Africa (EMEA) received $26.6 billion in H1’22, as against $31.6 billion in H2’21.

Venture capital investments dropped to $52.6 billion across the board in H1’22, whereas the US pulled in $27.2 billion and EMEA accounted for $16.6 billion. Asia-Pacific's venture capital investments stood at $8.7 billion but saw M&A transactions hit $31.8 billion in terms of deal value.

“With valuations coming under pressure, fintech investors are going to enhance their focus on cash flow, revenue growth, and profitability - which could make it more difficult for some fintechs to raise funds,” said Ruddenklau.

The payments sector saw global investments worth $43.6 billion during the H1’22, compared to $60.3 billion for the entire 2021, according to the report.

Asia-Pacific’s venture capital investments stood distributed and included $690 million raised by Coda Payments in Singapore and $300 million by Xendit in Indonesia. Indian fintech firm Stashfin raised $270 million and Oxyzo received $237 million.

Chinese fintech investment didn’t see much action compared to others during the first half of 2022. The country’s largest deal was inked by Fenbeitong, a corporate spend app platform, which raised $140 million in the Series C+ round.

“M&A activity, however, could see an uptick as struggling fintechs look to sell rather than holding a downround, corporate and PE investors move to take advantage of better pricing, and well-capitalized fintechs look to take out the competition.” Ruddenklau added.

Singapore's fintech funding dropped 15% to $2.14 billion in H1’22, as against $2.51 billion in H2’21. The report revealed that this was due to greater investor caution about market developments.

Asian market also saw cryptocurrency funding drop more than half its value to $539.1 million, down from $1.3 billion in H2’21, when crypto investments were at a record high. The sector also saw consolidation with seven exits or merger deals, noted the KPMG report.

Despite Singapore's fintech investments for H1’22 witness a fall compared to H2’21, the same saw a 64% increase when compared to the same period last year (H1’21), when it recorded $1.31 billion in combined deal value. According to KPMG report, this was due to "continued confidence" in fintech developments for fuelling growth and innovation in the financial sector.

KPMG, while explaining the challenges that are expected to play out through the year, including geopolitical uncertainty and rising inflation and interest rates, said that the fintech market could see activities slowing considerably.

It is also anticipated that the fintech investments may remain resilient in key areas such as B2B payments, cybersecurity automation, and data-driven analytics. The consulting firm also said that deals could take longer to complete as investors grew more critical of opportunities.