Asia's fintech funding on the mend

Singapore

SINGAPORE-based fintechs drew in US$167 million in Q3 2020, up 56 per cent from the previous quarter, data from S&P Global Market Intelligence showed.

The overall Asia-Pacific region also appears to be on the mend where fintech fundraising is concerned.

In Singapore, payment companies accounted for the bulk of the funding, with cross-border payments startup Thunes leading the pack, said S&P Global's research analyst Celeste Goh.

According to S&P Global, 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.

This comes as fintechs based in the Asia-Pacific 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, with deal volume down 20.5 per cent to 318.

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In the third quarter alone, Asia-Pacific 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 Asia-Pacific appear to have hit a trough in June, S&P Global added in a report.

"Both monthly funding volume and value have since risen, possibly signalling a cautious return of investor interest," said Ms Goh.

S&P Global noted that investors remain open to new opportunities, most notably in the payments sub-sector and to early-stage fintechs.

In its report, S&P Global found that over the first three quarters of the year, at least 15 out of 23 large Asia-Pacific 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."

China saw a resurgence in private fintech investments after a steep decline in the second quarter, and accounted for a third of Asia-Pacific's total 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, S&P Global's 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.

It would have topped fintech investments in Asia-Pacific if not for the large funding round in China involving Waterdrop, a healthcare-focused insurtech.

Waterdrop's latest fundraising round is the largest raised by an insurtech in Asia-Pacific in the first three quarters this year, the report said, bringing the firm's cumulative amount raised to US$480 million.

Customers of Waterdrop's mutual aid plans contribute a nominal sum to a pooled fund. Payouts from the fund will be made upon diagnosis of an eligible medical condition, permanent disability or death resulting from an accident, with Waterdrop charging a commission fee per payout on its mutual aid schemes.

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.