SINGAPORE (June 19): Even as stock markets suffered extreme volatility in the past few months, the Singapore fintech brushed off worries over the economic turmoil triggered by the Covid-19 outbreak.
Year to date, new equity funding raised here increased by 19% year-on-year to $462 million, according to a study by BCG FinTech Control Tower (FCT).
“As we come out of the coronavirus pandemic, FinTech has the great opportunity to make a meaningful impact in 2020 and beyond by accelerating digitalization of financial services,” Sopnendu Mohanty, Chief FinTech Officer of the Monetary Authority of Singapore, tells FCT in an interview.
“In spite of the challenging environment, investors’ confidence in FinTechs demonstrates a deep understanding and appreciation of the long-term value FinTechs firms will create,” he adds.
Within the overall FinTech community, 60% of the new funding raised, or some $288 million, went into those companies in the SME banking and technology business lines, with an increase of 210% and 180% respectively over the same period last year.
Examples of notable FinTechs within these two sub-sectors are digital financing platform Funding Societies, which dishes out loans to local small medium enterprises in South East Asia, digital cross-border money transfer platform NIUM, as well as Dathena, a provider of AI-powered data protection solutions.
Venture capital firm BEENEXT, for example, raised US$160 million for two of its funds. Dirk van Quaquebeke, founding managing partner BEENEXT, calls this a “milestone” for the firm. “Not only because we closed it in the eye of the COVID storm but also because we fundamentally believe that some of the greatest innovations and companies are born in a time of crisis.”
The first fund of US$110 million, “BEENEXT Emerging Asia Fund”, is meant for early-stage start-ups in India and southeast Asia. The second fund of US$50 million is to be used for software-as-a-service (SaaS) businesses to help nudge digital transformation in Japan.
Kabir Narang, general partner and co-head of Asia, B Capital Group, describes the Singapore Fintech sector as having reached an inflexion point in terms of size, investments and impact.
“As a global commerce centre, the market is uniquely positioned to adopt technologies that streamline every aspect of finance and trade, from accounting to transfers and payments to identity and security,” he says.
Companies developing products and infrastructure that can “reduce friction” throughout all aspects of a financial use case are favoured. “Businesses that can add value in the form of recouped time, transparency, reduced costs and mitigated risk are especially relevant to the Singapore market,” adds Narang.
Besides fund-raising, M&A within the Singapore FinTech sector remains active in the first half too, with some $185 million in total deals done.
Examples include Grab’s acquisition of Bento, a B2B robo-advisor and digital wealth technology provider; GoBear’s acquisition of AsiaKredit, a consumer lending platform targeting unbanked consumers in SouthEast Asia, as well as AMTD Group’s acquisition of CapBridge, a private capital platform and Policypal, which allows users to compare and purchase insurance online.
While the total number of FinTech deals in Singapore dropped marginally to 41 from 44 in the first five months of 2020 compared to the same period last year, the average deal size has increased by 20%.
Tan Yinglan, founding managing partner of Insignia explains that this was because of more financial activities – banking, lending, asset management -- in this region’s moving online.
“As many day-to-day transactions are moving online, consumers and businesses are demanding for the entire gamut of financial services to be online as well,” he says.
In a sign of growing maturity of the Singapore FinTech sector, the amount of seed, or early funding has decreased. In contrast, mid-stage so-called Series C+ funding has surged by 180% to $177 million.
From the perspective of Pauline Wray, managing director and global lead of BCG FinTech Control Tower, this is a sign that of the sector’s maturity, thanks to the growing prevalence of digital technologies in everyday lives.
The development can also be attributed to MAS’ push to develop and grow this sector. “The 5-year effort since the first supportive policies by MAS is now coming to fruition as the FinTech ecosystem is maturing in Singapore too,” says Wray.
