From a global high of US$47 billion in 2015, investment in fintech (financial technologies) companies has fallen by almost half, only notching about US$25 billion from investors in 2016, according to information from KPMG’s recent Pulse of Fintech report. European fintech investment in particular took a significant hit in 2016 generating only US$2.2 billion in 2016 from investors compared to US$10.9 billion in 2015.
Despite the drop in fintech investment volume, Asia remained a bright spot in the fintech realm capturing US$8.6 billion from investors, representing a slight increase of 0.2% compared to 2015. The significant difference between European and Asian fintech investments could indicate that European stakeholders are not as willing to support fintech ventures due to unfavourable market conditions on the continent.
Nevertheless, it is clear that fintech growth optimism is currently growing in Asia. The question will be how Asian fintechs can develop amid increasingly challenging conditions. A good indication for Asian fintech players is the willingness of Asian governments to support fintech ecosystems. While financial hubs such as Singapore and Hong Kong have taken a lead in developing fintech friendly spaces, other Asian markets such as Indonesia and India have also established similar schemes to foster growth. In the case of Indonesia, the country’s financial regulator (OJK) released guidelines this January on P2P (peer-to-peer) lenders operating in the country, instructing that P2P fintechs should have escrow and virtual accounts in banks before servicing customers.
Asian fintech companies involved in real-time payments are predicted to help boost the overall fintech landscape as customers within the region are demanding better payment options. The demonetization scheme in India late last year has led to increasing interest in transacting with payment companies and wallet providers. Three out of the top five fintech deals in Q4 2016 involved payment fintech companies. Beijing-based 51credit, a credit card management platform, was able to generate US$394 million from investors.
Future fintech-to-fintech collaboration will play a big part in sustaining the drive not only in Asia but also globally. In particular, Chinese fintechs, with their aspirations to go global have looked to partner with key players. Ant Financial Services, a subsidiary of Alibaba, formed a strategic partnership last November with Thai fintech Ascend Money.
“After experiencing significant success, larger domestic fintech players in China are beginning to look globally to fuel their continued growth and expect collaboration to be a critical part of their success. It is expected that further collaboration between fintech giants in China and companies in other regions will likely continue throughout 2017,” states Arthur Wang, partner and head of China banking at KPMG China.
