Funding in Singapore fintechs for the first half of 2023 is at a three-year low at US$934 million ($1.2 billion), falling 41% from the US$1.6 billion in the second half of 2022,G according to KPMG’s Pulse of Fintech report.
This trend follows the drop in global funding in fintech by 17% to US$52.4 billion across 2,153 deals, from US$63.2 billion across 2,885 deals in the same period a year ago.
The report, which was released on Aug 1, cites that a “cloud of uncertainty permeating the global market continues to wear on investors”, as global macroeconomic concerns such as high inflation and rising interest rates, geopolitical tensions and tech sector challenges persists.
In addition, the collapse of several US banks early in 2023 likely also kept many investors in “wait and see” mode during the first half of this year, according to the report.
In Singapore, 84 deals in mergers and acquisitions (M&A), private equity (PE), and venture capital (VC) accounted for the US$934 million raised, a drop from the 117 deals in 2H2022. However, the report notes that this year’s figure is still “well above” the 1H2019 funding slump of US$344 million across 70 deals.
Three sectors in fintech emerged as consistently well-funded in Singapore — payments; crypto; and artificial intelligence (AI) and machine learning. AI and machine learning funding attracted six deals amounting to US$129 million in 1H2023, which signifies an early growth of application in generative AI particularly in the areas of cybersecurity, insurtech and wealthtech.
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The payments sector saw eight deals worth US$119.6 million while the crypto space saw US$234.7 million across 36 deals. In the payment space, Singapore-based Thunes raised the largest round in the Asia Pacific region, amounting to US$60 million.
The report notes that consolidation was a key factor driving funding activity in the payment space, where in 1H2023, a number of fintechs embraced acquisitions in order to scale and grow their reach. Meanwhile, many investors are shifting their attention back to fintechs with core payments processing capabilities and robust business models.
On the other hand, as interest in crypto remained “soft”, interest in other solutions leveraging blockchain-based technologies continued to attract interest from investors. In particular, investors have shown continued interest in blockchain-based solutions related to the tracking and tracing of carbon credits and the traceability of food from farm-to-table.
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The global head of financial services at KPMG, Judd Caplain says: “The long-term business case for many subsectors within fintech remains very strong — particularly for sectors like payments, insurtech and wealthtech. Once market conditions begin to even out, funding will likely rebound —if not to the record level experienced in 2021.”
Globally, funding from VCs saw a small decline, but M&A and PE funding activity was “quite soft” for this half of the year.
The report found that the US took the lion’s share of fintech funding in 1H2023, where the US$34.9 billion in funding accounted for more than two-thirds of the US$52.4 billion seen globally. The Europe, Middle East and Africa region on the other hand, saw falls of more than 50% in funding.
In Asia Pacific, fintech funding declined to US$5.1 billion in 1H2023 from US$6.8 billion in 2H2022. The largest fintech deal in the region of this period was a US$1.5 billion raise by China-based consumer finance services company Chongqing Ant Consumer Finance.
The report notes that other deals in the region during the period were significantly smaller, including the US$304 million buyout of India-based small and medium-sized enterprise lending company Vistaar Finance by PE firm Warburg Pincus, the US$270 million raised by Singapore-based credit services firm Kredivo Holdings and a US$200 million raise by India-based digital lending platform Creditbee.
Globally, payment remains a top fintech subsector: while supply chain and logistics as well as green fintech “bucked downward trends”, showing resilience and ability to retain interest in funding despite market challenges.
Above all, AI is expected to make big gains, as companies around the world look to leverage AI’s full potential as part of efforts to improve both operational efficiencies and customer value.
