Q3 Apac fintech quarterly investments hit 2-1/2-year high: S&P

INVESTMENTS in Asian fintech companies clinched a new quarterly high since the first quarter of 2019, surging by 68 per cent from the previous quarter to US$5.47 billion in Q3 2021, according to a report by S&P Global Market Intelligence out on Monday (Nov 15).

Fintech analyst at S&P Global Market Intelligence, Celeste Goh, highlighted that with this record quarter, the total amount Asia-Pacific (Apac)-based fintechs raised year-to-date is at US$11.03 billion, surpassing pre-pandemic levels of US$9.01 billion recorded for 2019.

Goh pointed out that the increase is a result of continued growth in mega transactions with at least US$100 million in size and that newly-listed Apac-based fintechs have so far seen positive reactions from public markets, which may encourage more fintech investments in the region.

"The growth in massive financing rounds has been accompanied by increased valuations, which may in part be driven by improved fundamentals as we see an accelerated shift towards digital channels. However, it may also reflect private investors' willingness to pay higher multiples due to their bullishness in the fintech sector," she said.

The volume of transactions also rose by 21 per cent from the previous quarter to reach 216 deals in the third quarter. Geographically, India and South-east Asia fintechs led the pack, collectively accounting for 70 per cent of the aggregate funding value.

India continued to lead fintech investments in Apac with US$1.93 billion raised across 66 deals.

South-east Asia is "quickly catching up", with fintech investments in the region more than doubling to US$1.9 billion, while deal volume grew by 32 per cent to reach 62 deals.

"We expect South-east Asia-based fintechs to attract more capital as venture capitalists raise new money to double down on technology investments in the region," Goh noted.

Payment fintechs continued to draw in the lion's share of fintech funding in Apac, contributing 7 out of the 10 largest transactions in the third quarter, and half of the total funding amount raised by Apac fintechs.

"While consumer-facing payment apps have dominated funding into the payment sector in the past, business-to-business payment fintechs have been attracting more investors' attention of late," Goh said.

The surplus of capital flowing into fintechs has pushed up valuations, but public market investors have "largely appeared unfazed" by the high price tags.

Goh added: "Perhaps seeing the potential of a lucrative exit, some venture capitalists have recently raised fresh funding targeted at tech startups in the region. This leads us to believe that fintech funding in Asia-Pacific still has legs despite a record quarter."

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