Singapore records highest fintech funding in three years amidst a global slowdown

• KPMG Pulse of Fintech H2 ’22 shows that fintech investments in Singapore in 2022 witnessed a three-year high of US$4.1 billion across 250 deals.
• Singapore’s top three investment areas were crypto/blockchain, payments, and wealthtech.
• The global fintech market attracted US$164.1 billion across 6,006 deals in 2022, a fall from the high of US$238.9 billion seen in 2021.

2021 was a remarkable year for the fintech market, with a record number of deals and funding in every region, including the Americas, EMEA, and Asia Pacific. Unfortunately, the same cannot be said for 2022, as total investment and deal volume significantly declined worldwide. Regionally, however, Asia Pacific outdid the rest in terms of growth with a record US$50.5 billion in fintech investment in 2022, with Singapore hitting a three-year high of US$4.1 billion.

For context, 2021 saw a record level of total global fintech investment at US$238.9 billion and 7,321 deals. Last year saw total investment and deal volume fall to US$164.1 billion and 6,006, respectively. Based on a KPMG report for the second half of 2022 titled ‘Pulse of Fintech,’ global fintech investment in the second half of last year (H2’22) was US$44.9 billion, compared to the US$119.2 billion seen in the first half of the year.

“The more than 50% decline highlights the impact of the sharp drop-off in large deals. H1’22 saw eight mergers and acquisition (M&A) deals greater than US$1 billion. In contrast, H2’22 saw just four M&A deals over the same amount,” the report stated. For KPMG, the decline in deal value doesn’t tell the whole story.

“Deal volume was incredibly robust last year: the second-highest total next to 2021. Seed deals saw record investment, which bodes well for the long-term fintech pipeline,” the report stated. At a sector level, regtech investment soared to a new high, while geographically, the Asia-Pacific region also hit a new peak.

To top it off, KPMG also noted that while last year was low by comparison, it was still the third-best year for fintech investment and the second-best year for deal volume. On a regional basis, KPMG said the Americas continued to account for the largest share of fintech investment globally, attracting US$68.6 billion across 2,786 deals in 2022, of which the US accounted for US$61.6 billion across 2,222 deals.

Comparatively, the Asia-Pacific region saw US$50.5 billion in fintech investment across 1,227 deals, while the EMEA region attracted US$44.9 billion across 1,977 deals. “While both the Americas and Europe saw fintech investment decline, the Asia Pacific region slightly surpassed 2021’s peak on the back of the Afterpay acquisition,” the report noted.

KPMG International’s global head of financial services innovation and fintech, Anton Ruddenklau, reckons 2022 was a tale of two fintech markets. “The variance between the first half of the year and the second highlights the rapid shift in investor sentiment amidst a combination of challenges — high inflation and rising interest rates, the lack of IPO exits, the downward pressure on valuations, and, of course, the turbulence in the crypto space.”

Singapore leads Asia Pacific’s fintech funding

Overall, fintech investment in the Asia-Pacific region increased from US$50.2 billion across 1,604 deals in 2021 to US$50.5 billion across 1,227 deals in 2022 to achieve a slight record high. Overall, fintech investments in Singapore saw a year-on-year rise, hit a three-year high of US$4.1 billion across 250 deals in M&A, private equity (PE), and venture capital (VC) in 2022, according to the KPMG Pulse of Fintech H2 ’22.

“2022’s total deal value here saw a 22% increase, up from US$3.4 billion in 2021, and a 75% increase from 2020’s total deal value of US$2.3 billion. The 2022 figure is also the second highest fintech investment achieved by Singapore in the past decade after investments peaked at US$5.62 billion in 2019 just before Covid-19,” KPMG stated.

Globally, the top three areas for fintech investment in 2022 were payments, crypto/blockchain, and regtech. In Singapore, the top three areas of fintech investment were crypto/blockchain, payments, and wealthtech. “Regtech, in particular, saw incredible investment in 2022, while seed-stage deals received excellent attention from investors after years of late-stage deals getting priority,” Ruddenklau noted.

Overall, KPMG also noted that in the Asia-Pacific region, Singapore included, there has been a growing focus over the last year on developing B2B fintech solutions. For this year, jurisdictions in the Asia-Pacific region that already have strong crypto regulatory environments — such as Japan, Singapore, and Hong Kong — are expected to attract interest from crypto players and investors in the wake of the meltdown of FTX.

Even the payments sector is expected to continue to attract the largest deals in the region as the payments space was the biggest ticket for fintech investors in Southeast Asia in 2022. “After years of acceleration, however, payments companies in the region have started to shift their focus from customer acquisition to finding ways to extend their value and deepen their engagement with customers,” the report noted.

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