Asia experienced a solid increase in fintech investment in Q3 2017, with $1.21 billion raised across 41 deals. China accounted for more than 50 per cent of all Asian fintech investment at $745 million.
Notably, corporate participation in Asia fintech venture capital (VC) deals remained high at 22 per cent of overall round counts, although actual direct investment was minimal in 2017 with just $840 million invested YTD in associated deal value.
Over the next few quarters, corporate VC (CVC) investments are expected to grow as more traditional corporates look to make strategic investments, with Asia forecast to see additional fintech hubs in different jurisdictions.
“The fintech market continues to rapidly evolve with an increasing diversity of funding participation and sources, geographic spread and areas of interest,” says Ian Pollari, Global Co-Lead, KPMG Fintech.
“We are seeing the emergence of fintech leaders who are looking to expand internationally to scale their platforms, as well as large technology giants moving into adjacencies to create new value for their customers. This is a trend that is expected to continue and could force incumbent financial institutions to take bolder steps in response.”
In China, the focus of startups is expected to continue to shift more to B2B solutions given the expanded controls over consumer-facing activities. P2P lending is also expected to evolve as a result of new regulations, with larger players in the space continuing to grow, reflecting a larger trend towards consolidation and convergence.
In Singapore, an Indo-Asia Pacific business hub, the fintech sector saw $25.3 million over six deals in Q3 2017, with the Monetary Authority of Singapore (MAS) continuing to be the key driver of the city-state’s fintech ecosystem.
With 2018 a key checkpoint year for Singapore’s Smart Nation 2020 strategy, the MAS’s focus on innovation is only expected to grow. The regulator has already launched 10 Blockchain projects at various stages.
“The MAS is putting a lot of emphasis into the development of blockchain, with high expectations for successful pilot projects heading into 2018. In addition to blockchain, regtech is also a high priority for fintech in Singapore. Applications in regtech ranges from using AI to make workflow processes more efficient to finding ways to provide real time or near-real time monitoring of transactions,” said Chia Tek Yew, Head of Financial Services Advisory at KPMG Singapore.
According to KPMG’s Pulse of Fintech report, which used data compiled by capital markets database Pitchbook, total global fintech funding continues to remain strong, with $8.2 billion invested in Q3 2017, after more than doubling to $9.3 billion in Q2.
Although deal volume declined, Q3 2017 investment stood well above the $6.3 billion raised in Q3 2016. VC investment in fintech in Q3’17 saw a five-quarter high of $3.3 billion, although the total was well shy of the record $7.4 billion raised in Q3’15. The US led in terms of global fintech investment in Q3’17, with $5 billion deployed across 142 deals, while Europe and Asia lagged considerably behind. European fintech deals accounted for $1.66 billion of investment across 73 deals.
Despite healthy investment activity, early-stage investments (i.e. seed and angel stage rounds) declined to 67 deals for Q3 2017, a low not witnessed since Q1 2013, reflecting a shift towards larger deals and higher quality companies with proven business models.