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Fintech investments in Singapore cross billion-dollar mark

MAS also attracts innovation labs to strengthen the ecosystem.

Besides the funding shift towards more mature companies, another trend was that of payment startups and insurtech firms receiving significant monies.

FINTECH investments in Singapore have crossed the S$1 billion mark, research by professional services firm Accenture shows. And there seems to be more room to grow.

Investments for the nine months ended Sept 30 jumped 69 per cent, from US$435 million in the corresponding period last year to US$735 million.

The figures also showed larger bets on fewer deals as startups grew their business, with the number of fintech deals falling by almost a third to 94 from 133.

Monetary Authority of Singapore's (MAS) managing director Ravi Menon said the figures shot past expectations.

"This is a target that we had set for 2019, which we've now very happily achieved over three quarters."

Besides attracting innovation labs and more fintechs to be set up here, MAS also curated a session known as Deal Fridays, where dozens of fintechs and venture capitalists are brought together to exchange ideas and test solutions. Such an event creates a platform for deal-making, said Mr Menon, noting that these things don't happen overnight.

"You need to curate ideas, and you need to have a runway on which these ideas are discussed. That's another important part of the fintech ecosystem that's taking shape quite well," Mr Menon added.

For the report, Accenture Research worked with MAS to analyse fintech investment data from global venture-finance data and analytics providers CB Insights, Pitchbook and Tracxn.

The analysis included financing activity from venture capital and private equity firms, corporations and corporate venture capital divisions, hedge funds, accelerators and government-backed funds, with the investment data including both equity and non-equity financing.

Series funding, which typically targets companies looking to grow their business with external capital as they mature, jumped 66 per cent to US$442 million. The number of deals was relatively unchanged at 44 versus 43 in the first nine months of 2018. By contrast, angel and seed funding, which focuses on the earliest stage of capital raising for startups, dropped 56 per cent to US$54 million; the number of such deals declined 46 per cent to 29.

Besides the funding shift towards more mature companies, another trend was that of payment startups and insurtech firms receiving significant monies.

Among the fintech categories that attracted the most funding was that of payment startups, which accounted for 34 per cent of fintech fundraising. The value of payments deals more than doubled to about US$251 million from US$117.5 million, making the biggest contribution to overall gains this year, said Accenture. The number of deals with payments startups, also rose 60 per cent.

The lending category accounted for another 20 per cent, and insurtechs, 17 per cent. Funding to lending-related startups rose more than 50 per cent to about US$145 million from US$95.7 million, while insurtech funding nearly quadrupled to US$128 million from US$35 million.

The pick-up in both the value and number of deals for payment startups indicates that investors see a lot of potential opportunities in that segment, said Accenture. It also reflects the trend of fintechs and traditional financial firms looking for ways to collaborate amid Singapore's impending issuance of digital banking licences.

"As we've seen in other parts of the world, fundraising is shifting to support the scaling up of challenger and collaborative fintech, which will cause lumpiness in some rounds as the market becomes more mature," said Divyesh Vithlani, a managing director at Accenture and head of financial services in the Asean region.

"This steady flow of funds shows investors' confidence in the future growth potential of the fintech industry in Singapore. The upcoming unveiling of virtual banking licences will bring even more opportunities for fintech startups and traditional banks to partner and cooperate."

Separately, a Bain & Company report showed that digital financial services in South-east Asia will generate a base-case projection of US$38 billion in annual revenue by 2025, with lending set to make up about a third of this.

That being said, established players are expected to maintain a stronghold on the banked population. Given this, the underbanked - making up 24 per cent of the adult population from this region - will be the main growth engine. "Consumer tech platforms are well-positioned to gain share," the report showed.

The small- and medium-sized enterprises (SME) merchant opportunity is also large and waiting to be tapped, the report added, with 30 per cent of SMEs accepting digital payments. Another 46 per cent are likely to accept digital payments in two to three years.

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