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Singapore Fintech Deals Soar – Highest in Three Years

Singapore’s fintech industry has proven resilient with deal numbers for the first half of 2021 skyrocketing to its year-on-year highest in three years. A total of 72 deals amounting to US$614.2 million were transacted for Singapore fintechs from January to June this year – this is a 22 per cent increase from 59 deals in 1H 2020 and 50 per cent higher than the 48 deals in 1H 2019, according to data from the KPMG Pulse of Fintech Report H1’21.

After falling to US$4.7 billion across 357 deals in 2H 2020, investment amount in the Asia-Pacific soared to US$7.5 billion across 467 deals in 1H 2021– largely driven by venture capital activity. India led the way with US$2 billion in total fintech investment, followed by China at US$1.3 billion, Australia at US$900 million, while Singapore is not far off at US$614 million.

While the number of deals transacted has certainly gone up, Singapore fintech firms are transacting smaller value deals compared to last year. Investors are still willing to broker deals at strong valuations for companies, but not to quite the same extent as they did in the past. Transactions in 1H 2021 for Singapore fintechs totalled US$614.2 million, which is half of 1H 2020’s total deal value of US$1.02 billion.

A large part of 1H 2020’s total deal value had been from the US$856 million deal scored by a Singapore-based super-app during that period. That said, 1H 2021’s showing for Singapore is still an improvement from two years back – the deal value is double that of 1H 2019’s US$302.6 million.

The smaller sized deals are in part due to pulling back in financing from corporates and their venture arms year on year, given the degree of consolidation and emergence of clear category leaders across countries and regions. While corporates and their venture arms are still engaging in a decent number of rounds, these deals are smaller in size because the corporates are no longer joining in the mega-rounds of some of the largest companies.

Also, payments remain the top choice for fintech investors. Fintech investments in the payments space have kept up the momentum, retaining the top spot for investors’ wallets globally at US$19 billion for 1H 2021 – compared to $27.8 billion for the entire year of 2020.

Deal values for payments globally exceeded that of other fintech segments in 1H 2021 such as blockchain and cryptocurrency (US$8.7 billion), insurtech (US$7.1 billion), regtech (US$6.6 billion), cybersecurity (US$3.7 billion) and wealthtech (US$1.4 billion).

Among the fintech investments into payments in Asia-Pacific for 1H 2021, ‘buy now pay later’ was one of the fastest-growing sub-sectors in the payments space. The strong interest of investors in the payments space has been attributed in part to an increasingly diversified payments space, which is now going beyond person-to-person and bill payments.

As per a recent study, the Fintech community in Singapore has grown rapidly in the last five years, with exponential growth in the number of Fintechs and people employed by them. The adoption of Fintech by traditional Financial Institutions has also grown, as they have sought means to innovate and transform. Fintech funding has risen steadily to fuel this growth. Moreover, the concentration of Fintechs in Singapore and their diversity in terms of their business models demonstrate that Singapore is an attractive Fintech centre.

COVID-19 has also accelerated the pace of digital adoption, further benefitting Fintechs. In fact, in some sub-sectors of the economy, the pandemic has had a positive impact on business performance, particularly for businesses not exposed to credit risks, such as those involved in the facilitation of payments, wealth management, and insurance.

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