AMID a global funding winter, fintech investors in South-east Asia are concentrating the limited funds they are willing to cough up in early-stage startups and alternative lending.

Fintech funding in the region – or more precisely, the six largest Asean economies of Singapore, Indonesia, the Philippines, Vietnam, Thailand and Malaysia – has fallen by 70 per cent for the year to Sep 30, 2023, said a report by UOB, PwC Singapore and the Singapore FinTech Association released on Thursday (Nov 16).

The report, based on data from Tracxn’s platform, said early-stage companies received half the total fintech funding of US$1.3 billion, which went to six of the top 10 funded companies in the first nine months of 2023.

Investors surveyed in the report said that, for them, the key attractions in this space were the new ideas being explored by these early-stage startups, and the smaller capital outlays being sought.

The average fintech deal size stood at US$13.5 million for 9M 2023, down from US$21.8 million for 2022. For comparison, the average deal size in 2019, before the Covid pandemic, was US$9 million.

Shadab Taiyabi, president of the Singapore FinTech Association, said: “While the landscape for fintech funding across the region has certainly been trickier to navigate, it is good to see Singapore retain its (2022) position as the region’s most vibrant destination, attracting the highest number of deals.”

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A total of 51 deals were inked in Singapore, comprising 54 per cent of total deal volume of 94 logged for the six Asean economies. In terms of deal value, Singapore bagged 59 per cent, or US$747 million.

Among the nine categories of fintechs surveyed in the report, alternative lending led funding numbers across those six economies for the first time. This form of lending, which includes online lending and crowdfunding, attracted US$408 million, or 32 per cent of total fintech investments – a 22 percentage point increase from 2022.

Insurtech came in second at 25 per cent or US$325 million, increasing by 20 percentage points from 2022. In third place was payments, at 15 per cent or US$186 million, down 24 percentage points from 2022.

By deal volume, the cryptocurrency sector ranked first. However, its share of funding fell 10 percentage points from 21 per cent in 2022 to 11 per cent in 9M 2023, as investors avoided overvaluing the sector.

The fintech slump in the six Asean economies in 9M 2023 mirrors the global one. Fintech funding globally fell to US$43.5 billion as high interest rates and an uncertain economic environment crimped investor appetite. The decline follows the US$163 billion raised in 2021 and the US$107 billion in 2022.