Singapore, followed by its adjacent Southeast Asian (SEA) markets, is bucking the trend as global fintech funding faces a period of correction after a record 2021.
According to figures released by KPMG on July 13, Singapore has doubled its global share in the fintech industry.
By deal value, the republic saw its global market share double to 6.4% in the 2Q2022 from 3.1% of global deal value for fintech in FY2021.
The share of the number of deals in Singapore against global deal numbers now stands at 5.1% against a 3.4% average in FY2021.
KPMG adds that deal sizes for Singapore have grown 10% in the 2Q2022 to average US$43.9 million ($61.8 million) from the US$39.8 million across FY2021.
The country’s deal activity for the first half of 2022 is also the second-highest on record behind 2021.
“Whilst we are seeing the fintech investment market correcting globally, Singapore is holding its position well. As the trusted hub for high growth and rapidly digitising Asian markets, the diligence in developing an open, cross-border ecosystem is paying dividends,” says Anton Ruddenklau, global head of fintech at KPMG International.
“However, we shouldn’t be complacent and we should continue to evolve the mix of services to retain relevance to investors and users of the next generation of innovative services. The recent Point Zero Forum is a good yardstick for this future investment into digital assets, sustainable and embedded finance,” he adds.
After a banner year of seeing US$210 billion ($295.42 billion) being invested across fintech sectors in FY2021, investors are now being more discerning with total investments of US$108 billion in the 1H2022, says KPMG.
The contraction is attributable to a mix of macro drivers including the rise in interest rates and the higher cost of capital.
The firm adds that private capital investors such as private equity (PE) and venture capital (VC) firms are now refocusing their investments in 2022 towards technology that will fuel industry transformation over the next ten years and beyond.
“Fintech in the domains of climate change, supply chain, financial & crypto market infrastructure, artificial intelligence and agritech is now attracting high interest,” says KPMG in its statement.
Following the Singapore government and the Monetary Authority of Singapore’s (MAS) commitment to drive change across sustainable finance and digital assets, KPMG expects these initiatives to continue positioning SEA as one of the largest deal markets in the Asia Pacific (APAC) region.
This, in turn, may potentially catalyse the initial public offering (IPO) market in 2023.
“MAS’s Project Greenprint demonstrates a unique and ambitious system-wide approach to the innovation of Financial Services to support both Transition and Sustainable Finance. Investors recognise that this is set for incredible growth and it will likely be stimulated by a new generation of technology entrepreneurs supporting change both within real economy sectors and financial services concurrently. Critical to the project’s success is the global attraction, development and scaling of the best green fintech firms to Singapore. KPMG’s recent announcement of its business foundry fintech accelerator, along with other MAS initiatives, is set to deliver on this need”, says Ruddenklau
As of June 2022, there are 1,007 operating fintech firms in Singapore, making it the highest among countries in SEA. The figure also represents 67% of the region’s total of 1,482 operating fintech firms.
The way KPMG sees it, Singapore’s market stability is thanks to the city-state’s ranking among the world’s most competitive economies and its recognition as a dynamic global financial hub, with estimated total assets of $4.7 trillion under management.
For the last two years running, Singapore has been nominated as the top global innovation location for technologists by its peers in KPMG’s Global Technology Innovation Hubs research.