Singapore fintech funding still hot amid funding winter: KPMG

SINGAPORE fintech funding hit a three-year high in 2022, even as lower valuations, turbulence in cryptocurrencies and uncertain economic conditions dented global fintech investments.

Total deal value rose 22 per cent to US$4.1 billion in 2022 across 250 deals in mergers and acquisitions (M&A), private equity and venture capital, compared with US$3.4 billion in 2021, KPMG said in its Pulse of Fintech report.

This was also the second-highest investment achieved by the Republic over the decade, bucking a global trend of falling fintech investments. Crypto and blockchain, payments and wealth tech were among the top areas for funding.

In 2022, global deals totalled US$164.1 billion, down from US$238.9 billion. The number of deals also fell to 6,006, compared with 7,321 in the year-ago period.

In the Asia-Pacific region, investment hit a marginal new high of US$50.5 billion in 2022, from S$50.2 billion in 2021. Block’s S$27.9 billion acquisition of Australia-based buy now, pay later company Afterpay accounted for half of the investment value and placed Australia in the top spot at US$30.2 billion.

In contrast, fintech investment in China remained “very weak” in 2022 at US$770 million.

In terms of trends, investors shifted away from cryptocurrencies, but continued to pour money into blockchain-based solutions such as real-time payment settlement pre-validation, streamlining cross-border payments and tokenising assets.

In 2023, KPMG expects investors to shift towards startups focused on providing solutions for small and medium-sized enterprises and away from blockchain companies focusing on retail markets. However, global fintech investments will likely remain subdued.

With interest rates still rising, valuations will also remain quite tricky for some time, said Anton Ruddenklau, KPMG International’s global head of financial services innovation and fintech.

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“This will likely keep a lot of the biggest potential M&A transactions on the shelf as investors wait to see if prices come down even further. That said, M&A activity will likely increase for smaller-sized deals as corporates and larger fintechs look to buy fintech capabilities at good value,” he added.