The Pulse of Fintech H2'21 – ASPAC

An overview of ASPAC fintech investment trends and highlights in the second half of 2021.

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Fintech investment in Asia-Pacific nearly doubles amid record deal volume

Fintech investment in the Asia-Pacific region reached $27.5 billion in 2021 across a record 1,165 deals. While total investment fell well shy of 2019’s peak, it was almost twice the $14.7 billion seen in 2020.

Investment was particularly strong in H1’21, led by the $2.7 billion acquisition of Japan-based BNPL firm Paidy by PayPal, a $600 million PE investment in India-based Pine Labs, and large VC funding rounds by India-based BharatPe ($395 million), Razorpay ($375 million), and OfBusiness ($325 million).

Total investment activity in fintech ASPAC

Key highlights from the Asia-Pacific region in H2’21

Interest in embedded finance and BaaS models growing

During 2021, interest in embedded finance propositions grew in the Asia-Pacific region, particularly Southeast Asia where banks are increasingly looking for assistance to improve their embedded finance, digital wallet, and supply chain finance capabilities.

Interest in BaaS solutions was also on the rise during the year with numerous banks and startups across the region focused on the issue – whether as service providers, partners, or potential clients. During H2’21, HSBC took a strong step into the BaaS space, announcing a partnership with NetSuite to embed international payments and expense management into the company’s SuiteBanking platform¹.

Regulatory activity in China drives attention to other ASPAC markets

During 2021, China continued to enhance regulations in the fintech space – most notably banning cryptocurrency transactions, bitcoin mining, and the facilitation of cryptocurrency trading. While the uptick in regulatory activity in China led some fintech investors to pull-back from China, it also raised the profile of other fintech hubs in the region – including India and Singapore. Among the top 10 deals in the region this year, only one – a $308 million raise by MediTrust Heath – occurred in China; deals in Japan, South Korea, India, and Singapore accounted for the others.

Fintechs increasingly focus on data value propositions to attract investment

Over the last year, there’s been a growing trend among scaling fintechs across the Asia-Pacific region to reinvent themselves as data organisations in order to attract more attention and investment – billing themselves as data providers that offer payments, lending, insurance, or other related activities rather than simply fintech companies.

BNPL space continues to heat up

During 2021, the BNPL space in the Asia-Pacific region was incredibly hot, driving in part by PayPal’s acquisition of Paidy for $2.7 billion in H2’21.

2022 is expected to start off on an incredibly high note given the H2’21 announcement of the $29 billion acquisition of Australia-based Afterpay by Block (formerly Square) – a deal likely to close in H1’22².

Fintech trends to watch for in 2022

Singapore growing on the radar of companies looking for a base from which to expand outside of the Asia-Pacific region.
Growing investment from Asia-Pacific based countries into developing regions, including the Middle East, Africa, and Southeast Asia.
Continued growth of embedded finance, including banking and insurance.

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VC investment in fintech remains robust as M&A activity stalls.

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Global and regional analysis with key investment data and insights.
Top fintech trends for 2021 and beyond.
Interviews with Quantexa and Thought Machine.
Fintech segment insights for a deeper dive into payments, insurtech, regtech, wealthtech, cybersecurity, blockchain and cryptocurrency.

To learn more about the analysis and topics raised in this edition, or to discuss your organisation's unique fintech agenda and roadmap, please contact your local KPMG advisors or the contributors in this publication.