Asia-Pacific fintech funding in Q3 hints at nascent recovery: S&P

THE Covid-19 pandemic has taken a toll on investments in Asia-Pacific's (Apac) private financial technology (fintech) companies, but recent data suggests that a recovery might be in sight, according to a report by S&P Global Market Intelligence.

Fintechs based in the region raised a combined US$3.9 billion over the first three quarters this year, down 46 per cent from the same period a year ago, while deal volume tumbled 20.5 per cent to 318, S&P Global noted on Thursday.

In the third quarter alone, Apac fintechs raised some US$1.3 billion, 8.7 per cent lower than the previous quarter. That said, year-to-date capital flows into fintechs in Apac appear to have hit a trough in June, S&P Global added.

"Both monthly funding volume and value have since risen, possibly signalling a cautious return of investor interest," said Celeste Goh, S&P Global's research analyst.

Investors remain open to new opportunities most notably in the payments subsector and to early-stage fintechs as well. The report found that over the first three quarters of the year, at least 15 out of 23 large Apac fintech funding rounds with transaction size of US$50 million and above still had participation from new investors, two-thirds of which are in series B or prior.

Added Ms Goh: "Nearly half of the large transactions with new investors took place in the third quarter, a promising sign that the funding environment for private fintechs in Asia-Pacific is on the mend."

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In particular, Singapore-based fintechs drew in a combined US$167 million in Q3 2020, up 56 per cent from the previous quarter, Ms Goh told The Business Times. Payment companies accounted for the bulk of the funding, with cross-border payments startup Thunes leading the pack. According to Ms Goh, Thunes' US$60 million Series B round in September marks the largest fund raised by a Singapore-based fintech over the first three quarters this year.

Elsewhere, China saw a resurgence in private fintech investments after a steep decline in the second quarter, and accounted for a third of Apac's fintech funding value in Q3 2020. Deal counts by Chinese fintechs doubled to 20, while venture capital flows surged by more than tenfold to US$425 million compared against the second quarter this year, the report showed.

Meanwhile, South-east Asia saw the most fintech funding activity in Q3, in line with S&P Global's observation that investors are increasingly eyeing opportunities in the region.

Of the six fintech industry segments tracked by S&P Global, insurtech was the only category that saw an increase in both funding value and volume for the three months ended Sept 30. This was thanks to larger financing rounds by China's Waterdrop, India-based Acko General Insurance and PasarPolis Indonesia. The three insurtechs cumulatively accounted for 88.7 per cent of venture capital into the segment, the report noted.