Asia's financial technology sector has been hit hard by macroeconomic headwinds as a result of the Covid-19 pandemic, which has resulted in a significant drop in the number of deals closed, according to a new report.
The amount of venture capital raised by fintech companies in the Asia-Pacific region fell 58.5 percent to $1.3 billion in the first quarter of the year, S&P Global Market Intelligence said in a report published on Tuesday.
The report said that fintech funding in China «appears to be gaining momentum, » with consistent growth in capital raised over the first three months of the year, but highlighted losses at Softbank's Vision Fund, and India's clampdown on foreign investments from neighboring countries as near-term challenges for fundraising.
«Outlook for fundraising activities in the near term will likely continue to be restrained. Nevertheless, investors' continued interest in digital-only banks offers some optimism as regulators across various APAC economies are preparing to open the banking industry to technology players,» Celeste Goh, fintech analyst at S&P Global Market Intelligence, said.
Bright Spots
According to S&P, fintech funding in APAC in the first quarter was into payment companies. Payment companies were the top-funded fintech segment with $403 million raised across 22 transactions. Mobile payment apps, in particular, saw larger funding rounds and accounted for three of the 10 largest transactions in the first quarter.
These apps include South Korea's NHN Payco, which raised $64.4 million in January, India's PhonePe, which raised $59.7 million from Walmart-owned Flipkart Payments in February, and Japan's Kyash, which raised $43.7 million in a series C round in March that it plans to use to expand into the banking sector.
Neobanks a «Ray of Hope»
The report noted strong investments into Australian neo-banks – Xinja received a two-year capital injection earlier in March, while Volt Bank closed a $70 million series C round in January as part of the pre-IPO process. the two deals accounted for 93.5 deals of the country's total fintech fundraises in the first quarter.
These numbers bode well for upcoming digital banks in APAC, S&P said. The region is busy with digital banking developments, with a number of digital banks set to be launched this year, following the issue of eight virtual banking licenses by the Hong Kong Monetary Authority. So far, only ZA Bank has officially begun operations. Singapore is also expected to announce the five digital banking license recipients later this year.
