Fintech in Asia defies investment fall

Fintech companies around the world have had a difficult period in 2022, with many struggling to raise funds due to soaring inflation and rising interest rates. According to CB Insights, investment into fintech halved to $75.2bn.

However, this trend has been bucked by Asian fintechs, with investment reaching a record high of $50.5bn in 2022. The financial wealth of Asia has tripled since 2006 to $140tn, but 70% of Southeast Asia is either unbanked or underbanked, making it a ripe market for financial innovation.

Singapore is the standout market for fintech in Southeast Asia, drawing the bulk of sector funding, but other countries are catching up. Indonesia, for example, accounted for a quarter of the deals in Southeast Asia in 2022, amounting to $1.4bn of funding, according to UOB. India is also a hotspot for fintech, with 7,460 fintech companies, making it the third largest fintech market globally after the US and China.

However, China dominates the fintech market in Asia, with regional super apps like Alipay from Alibaba and WeChat from Tencent Holdings. Chinese investors and businesses are still keen to invest in fintech start-ups elsewhere in Asia, despite the Beijing crackdown.

Wing-Fai Ng, the chair of AGBA, a Hong Kong-based financial services and fintech business, says that Singapore has created a “favourable environment” through supportive regulation and seed capital, but “many of its businesses have lacked the ability to scale up”. Analysts believe that Beijing’s recent tech clampdown is likely to benefit markets and operators elsewhere, as Chinese businesses take a more cautious approach to growth.

Despite the challenges, analysts expect fintech businesses to surge across Asia as incomes climb and the adoption of digital technology expands further among fast-growing populations. Tzu-Chung Liang, the southeast Asia financial services strategy and transaction leader at consultancy firm EY, says that “Asia has one of the world’s youngest workforce and consumer groups, with a high adoption rate of mobile and digital technologies, so it’s a ripe market for financial innovation”.