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Singapore notches record US$229m fintech funding in '17: KPMG


BUOYED by US$122.75 million of funding in the fourth quarter, Singapore achieved a record high of US$229.1 million of fintech funding in 2017, according to KPMG's Pulse of Fintech report.

The record was attained despite a dip in the number of deals done throughout the year - from 37 in 2016 to 29 in 2017. Additionally, the smaller deal base in the past year meant that each was worth an average of US$7.9 million in 2017, bettering the US$5.9 million average in 2016.

The high in fintech funding was mainly attributed to two of Asia's 10 biggest deals - with a combined value of over US$130 million - taking place in Singapore in the fourth quarter.

The deals involve mobile commerce startup GoSwiff's US$100 million purchase by Paynear Solutions - which boosted fourth quarter deal volume to a high compared to the prior three years, and global asset management fintech player Smartkarma's US$13.5 million Series B round.

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The Republic continued to showcase its value as an Asia-based fintech hub, particularly in areas such as blockchain, artificial intelligence and machine learning, KPMG said.

It also cited Singapore's ability to attract well-established venture capital (VC) funds, large corporates and established fintech companies, among others, to make investments or set up base for expansion into South-east Asia as a reason behind Singapore's growth as a regional fintech hub.

Chia Tek Yew, KPMG's head of financial services advisory noted that "given the fragmented markets in Singapore, fintechs are not taking a disruptive approach to these services, focusing instead on building partnerships with telcos and other local players in order to better engage with potential customers".

"2018 will be a key checkpoint year for Singapore's Smart Nation 2020 strategy and the Monetary Authority of Singapore's focus on innovation is only expected to grow, with blockchain being one major priority," he added.

On top of blockchain, Mr Chia also considered regulatory technology (regtech) and financial inclusion as other key priorities for fintech in Singapore.

While fintech funding grew in Singapore, the total value of deals in Asia for the fourth quarter fell to US$748 million across 38 deals.

This came despite a strong third-quarter showing of over US$1 billion. VC funding faltered considerably in the region, dropping almost 50 per cent quarter-on-quarter to US$550 million.

Lower fintech investment in China accounted for much of the decrease in Asia. Fourth quarter fintech investment in China represented just US$45.8 million of the total investment in China (US$1.33 billion) in the past year, KPMG said in the report.

On an annual basis, total fintech funding in Asia fell to US$3.85 billion in 2017 - a massive drop from the more than US$10 billion invested in 2016, KPMG added.

While the region faced a dip in funding for 2017, corporate participation in fintech deals grew during the fourth quarter, rising from a 12-quarter low of 11 per cent in the third quarter, to reach a new high of over 31 per cent.

Globally, the US continued to dominate global fintech investments, accounting for almost two-thirds in the fourth quarter as total global fintech investments for 2017 stood at US$31 billion, unchanged from 2016.

Among types of funding, the report found that global fintech deal volume declined in the fourth quarter despite the number of VC transactions exceeding 1,000 for the fourth consecutive year in 2017. Private equity deals reached a new high of 139 in 2017 while fintech merger and acquisition deals also ticked up for the year with 336 transactions.

In fintech sub-sectors, both insurtech and blockchain saw record levels of VC investment and deal volume in 2017, with insurtech accounting for US$2.1 billion across 247 deals and blockchain generating US$512 million of investments across 92 deals.

One of the trends KPMG forsees this year is the renewal of fintech activity in China, provided Chinese unicorns such as Lufax, which plans to hold an initial public offering in April, are able to do so successfully.

"The growing clarity around fintech regulations in China should also help bring investments back and help drive additional funding into the regtech sector over the next year," the report said.

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