India dethrones China to emerge as Asia’s fintech funding hub in Q1

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At a time when risk capital investors are increasingly evincing interest in India’s sunrise fintech sector, they are tightening their purse strings in China in the backdrop of tight regulatory oversights put in place to curb online lending practices.

Consider this: In the first quarter of 2019, the number of venture capital (VC) investments in fintech companies in China dropped to 29 from 49 in the last quarter of 2018, according to data compiled by venture intelligence firm CB Insights.

In terms of value, in the January-March period this year, VC-backed fintech deals in China witnessed an 87.56 per cent drop to $192.1 million from $1.54 billion in the corresponding period last year.

Indian fintech companies, on the contrary, seem to be on a joyride with massive opportunities coming up in the sector. The country recorded VC-backed fintech deals worth $286 million in the quarter.

In terms of deal volume, fintech deals in India registered a 61.1 per cent growth in the first quarter of this year from 18 deals in the last quarter of 2018.

Although in terms of numbers, both countries stood at par with each other. The drop in China’s fintech deal market signals the cautious approach that investors are preferring to adopt amidst measures being implemented by the Chinese government to curb financial risks in the digital sector.

Asian Slump

It may be worthwhile to note that Asia-focused VC-backed fintech funding in Q1 2019 dropped by over 50 per cent when compared to the corresponding period in Q1 2018. This, experts say, is primarily due to a drop in VC activity in fintech market in China.

In terms of value, VC firms invested $875 million across 127 fintech deals in Asia in the January-March period this year, per data available with CB Insights. The first quarter of 2018 had witnessed 131 fintech deals worth $2.159 billion.

While the Indian market registered a jump in the number of fintech deals in the VC space, on a YoY basis, the total volume of deals done in India remained flat when compared to Q1’19. Also, with China witnessing a five-year low in Q1’19, overall investor sentiment remained subdued.

The amount of Asia VC-backed fintech funding deals also lagged behind continents such as Europe and North America.

Despite the sharp drop in deal volume and value in Asia VC-backed fintech deals, the medical services sector has seen its mutual aid platforms take off as regulatory controls on VC-backed crowdfunding medical coverage in China was not as tight as compared to the online lending sector.

CB Insights highlighted two examples including Shuidihuzhu, which received $74 million in a Series B funding round backed by Tencent and BlueRun Ventures.

The other funding round involved the October 2018 launch of Xiang Xu Bao, Ant Financial’s online healthcare crowdfunding platform. The medical platform provides lump-sum payouts for 100 critical injuries or diseases based on payments collected from its members.