The fintech sector in Southeast Asia saw a resurgence in funding deals in the first quarter of this year, but concerns linger over how long the momentum will last.
According to a recent DealStreetAsia – DATA VANTAGE report, fintech remained the most active vertical in the region, with 40 deals announced during the quarter. The spike follows the inking of 32 fintech deals in the previous quarter (Q4 2023) and a low of 22 transactions in Q3.
However, according to SE Asia Deal Review: Q1 2024, the first-quarter performance still trails the deal volume seen in Q1 2023.
The dip is more prominent in the total equity funding secured by fintech startups in the region. In Q1 this year, private investors pumped $324 million into the sector, nearly half the amount they invested in the first quarter of 2023.
Equity funding for fintech firms per quarter
Singapore-based fintech startups dominated the funding charts, accounting for more than half of the funds raised in the first quarter. They were followed by their counterparts in Indonesia (34%) and the Philippines (13%).
Wealthtech was top dealmaker in Q1
Under the broader fintech umbrella, the wealthtech category contributed the most deals in Q1, followed by fintech lending. Digibank services, e-payment and fintech solutions shared the third position.
In terms of deal value, digibank services topped the charts, followed by fintech lending and wealthtech. Seven of the top 10 fintech deals in Q1 2024 belonged to these three categories.
Indonesia-based insurtech firm Qoala was the top fintech fundraiser in the first quarter with its $44.9 million Series C round. Singapore and Switzerland-based digital bank Sygnum’s $40 million financing and the Philippines-based UNOBank’s $32 million pre-Series B funding rounded out the top three. These three companies accounted for over 36% of the total fintech funding secured during the period.
DeFi gains momentum, helps fintech recovery
Decentralised finance (DeFi) startups gained new momentum in Q1 due to rising interest in blockchain-powered fintech services and a recovery in the crypto market.
DeFi deals accounted for 43% of the overall fintech deal volume in the first quarter, rising from a mere 5% share in Q1 2020. The category also contributed 42% to the total deal value, the highest quarterly proportion to date.
“Singapore is widely regarded as one of the most crypto-friendly jurisdictions globally, with clear regulatory frameworks for stablecoin issuers under the Payment Services Act. Last year, the Monetary Association of Singapore also unveiled plans to pilot the “live” issuance of a wholesale central bank digital currency for interbank settlements. With these encouraging developments in the region, we see opportunities in the application of blockchain and DeFi, for instance, in facilitating cross-border money flow and trade,” said Monk’s Hill Ventures partner Susli Lie.
