Singapore records highest fintech funding in three years amid global slowdown

• KPMG Pulse of Fintech H2 ’22 shows that in 2022 fintech investment in Singapore witnessed a three-year high of US$4.1 billion across 250 deals.
• Singapore’s top three investment areas were crypto/blockchain, payments and wealth technology.
• The global fintech market attracted US$164.1 billion across 6,006 deals in 2022, down from a high of US$238.9 billion in 2021.

2021 was a remarkable year for the fintech market, with a record number of deals and funding in every region, including the Americas, EMEA and Asia Pacific. Unfortunately, the same cannot be said for 2022, as total investment and deal volume fell significantly worldwide. Regionally, however, Asia Pacific outpaced the rest in terms of growth with a record US$50.5 billion in fintech investment in 2022, with Singapore reaching a three-year high of US$4.1 billion.

For context, 2021 saw a record level of total global fintech investment of USD 238.9 billion and 7,321 deals. Last year, total investment and deal volume fell to $164.1 billion and $6,006, respectively. Based on a KPMG report for the second half of 2022 titled “Pulse of Fintech”, global fintech investment in the second half of last year (H2’22) was USD 44.9 billion, compared to USD 119.2 billion seen in first half of the year.

“The more than 50% decline highlights the impact of the sharp decline in large deals. H1’22 saw eight mergers and acquisitions (M&A) deals of more than US$1 billion. In contrast, H2’22 saw only four M&A deals above the same amount, the report says. For KPMG, the decline in contract value does not tell the whole story.

“Deal volume was incredibly robust last year: the second highest total since 2021. Seed deals saw record investment, which bodes well for the long-term fintech pipeline,” the report tired. At a sectoral level, investment in regtech rose to a new high, while geographically the Asia-Pacific region also reached a new peak.

To top it off, KPMG also noted that while last year was low by comparison, it was still the third best year for fintech investment and the second best year for deal volume. On a regional basis, KPMG said the Americas continued to account for the largest share of fintech investment globally, attracting $68.6 billion across 2,786 deals in 2022, of which the US accounted for $61.6 billion across 2,222 deals.

In comparison, the Asia-Pacific region saw US$50.5 billion in fintech investments across 1,227 deals, while the EMEA region attracted US$44.9 billion across 1,977 deals. “While both the Americas and Europe saw declines in fintech investment, the Asia-Pacific region slightly surpassed the 2021 peak on the back of the Afterpay acquisition,” the report noted.

KPMG International’s global head of financial innovation and fintech, Anton Ruddenklau, believes 2022 was a tale of two fintech markets. “The variance between the first half and the second highlights the rapid shift in investor sentiment amid a combination of challenges – high inflation and rising interest rates, the lack of IPOs, the downward pressure on valuations, and, of course, the turbulence in the crypto space.”

Singapore leads Asia Pacific’s fintech funding

Overall, fintech investment in the Asia-Pacific region increased from USD 50.2 billion on 1,604 deals in 2021 to USD 50.5 billion on 1,227 deals in 2022 to achieve a slight record high. Overall, fintech investment in Singapore saw year-on-year growth, reaching a three-year high of $4.1 billion across 250 M&A, private equity (PE) and venture capital (VC) deals in 2022, according to KPMG Pulse of Fintech H2 ’22.

“2022’s total deal value here saw a 22% increase, up from $3.4 billion in 2021, and a 75% increase from 2020’s total value of $2.3 billion. The 2022 figure is also the second highest fintech investment achieved by Singapore in the past decade after investments peaked at $5.62 billion in 2019 just before Covid-19, KPMG said.

Globally, the top three areas for fintech investment in 2022 were payments, crypto/blockchainand regtech. In Singapore, the top three areas for fintech investment were crypto/blockchain, payments and wealth technology. “Regtech in particular saw incredible investment in 2022, while seed-stage deals received excellent investor attention after years of late-stage deals being prioritized,” noted Ruddenklau.

Overall, KPMG also noted that in the Asia-Pacific region, including Singapore, there has been an increasing focus over the past year on developing B2B fintech solutions. For this year, jurisdictions in the Asia-Pacific region that already have strong crypto regulatory environments – such as Japan, Singapore and Hong Kong – are expected to attract interest from crypto players and investors in the wake of the FTX meltdown.

Even the payments sector is expected to continue to attract the biggest deals in the region as the payments space was the biggest ticket for fintech investors in Southeast Asia in 2022. “However, after years of acceleration, payments companies in the region have begun to shift their focus from customer acquisition to finding ways to increase their value and deepen engagement with customers,” the report noted.