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Fintech funding in Asia-Pacific fell 58.5% in Q1: report

THE total amount of venture capital raised by fintech companies in the Asia-Pacific region in the first quarter of the year fell 58.5 per cent sequentially to US$1.3 billion (S$1.81 billion), a report by S&P Global Market Intelligence on Tuesday said.

It added that the outlook for fundraising activities in the near term is likely to be subdued.

SoftBank's ongoing struggle to pare down portfolio losses and attract investors for its second Vision Fund "could be an indication that technology startups around the world will face difficulties in raising money in the months ahead", it added.

And while India-based fintech firms led Asia-Pacific in attracting the most funding in Q1 - at US$543.4 million, or 42.9 per cent of the region's total - the country is clamping down on foreign investments from neighboring countries, including China, to prevent opportunistic takeovers of local corporates amid depressed asset prices arising from the pandemic, the report said.

"Foreign investments to India are now subject to mandatory government clearance, which may stem new capital inflows," the report noted. India has been on a stringent lockdown since March.

To be sure, the report said that China's pace of fintech funding appears to be "gaining momentum" as the country regains control over the pandemic. China's fintech firms recorded consistent growth in capital raised across the first three months of 2020.

Among the six industry segments the report tracked, payment companies were found to be in the top-funded segment, with US$403 million raised across 22 transactions.

Mobile payment apps in particular saw larger funding rounds, accounting for three of the 10 largest transactions in the first quarter.

These apps include South Korea's NHN Payco, which raised US$64.4 million in January, India's PhonePe, which scored US$59.7 million from Walmart-owned Flipkart Payments in February, and Japan's Kyash, which raised US$43.7 million in a series C round in March that it plans to use to expand into the banking sector.

The report also noted investors' continued interest in challenger banks globally amid the Covid-19 outbreak, with UK-based Revolut and Starling Bank raising US$504 million and US$77.5 million respectively in February.

This global development offers "a ray of hope" for newly minted digital banks and virtual banking contenders in Asia-Pacific - a region that has been busy with digital banking developments.

Last year, the Hong Kong Monetary Authority issued eight virtual banking licences for digital banks expected to be launched this year.

However, disruptions arising from the pandemic have led to delays, with only ZhongAn Technologies International's ZA Bank having officially begun operations.

Meanwhile, Singapore is due to announce its digital banking licencees in the second half of 2020 - with up to five licences made available - while Malaysia is currently firming up its regulatory framework for virtual banks.

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