Asia-Pacific sees fintech investment rise in H1’22, despite fall in global numbers: KPMG report

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

According to the report, global fintech investment fell 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 sluggish in comparison.”

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

Asia-Pacific’s investments had more than doubled in H1’22, up from $19.2 billion in H2’21. This is largely due to Block’s $27.9 billion acquisition of Australian buy now pay later (BNPL) service provider Afterpay, the report revealed.

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

On the other hand, the US saw total investment 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, compared to $31.6 billion in H2’21.

Venture capital investment fell to $52.6 billion across the board in H1’22, with the US pulling in $27.2 billion and EMEA accounting for $16.6 billion. Asia-Pacific venture capital investment was $8.7 billion, but saw M&A transactions reach $31.8 billion in terms of deal value.

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

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

Asia-Pacific’s venture capital investments were 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 investments didn’t see much action compared to others in the first half of 2022. The country’s biggest deal was inked by Fenbeitong, an app platform for businesses, which raised $140 million in Series C+ round.

“However, M&A activity could see an uptick as struggling fintechs look to sell rather than hold a slump, corporate and PE investors move to take advantage of better prices, and well-capitalized fintechs look to take on the competition .” Ruddenclaw added.

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

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

Despite Singapore’s fintech investment for H1’22 showing a drop compared to H2’21, it saw a 64% increase compared to the same period last year (H1’21), when it recorded $1.31 billion in total contract value. According to the KPMG report, this was due to “continued confidence” in fintech developments to stimulate growth and innovation in the financial sector.

While explaining the challenges expected to play out throughout the year, including geopolitical uncertainty and rising inflation and interest rates, KPMG said the fintech market could see activity slow down considerably.

Fintech investment is also expected to remain resilient in key areas such as B2B payments, cybersecurity automation and data-driven analytics. The consultancy also said deals could take longer to complete as investors became more critical of opportunities.