Singapore’s Fintech industry has proven resilient with deal numbers for the first half of 2021 (1H 2021) surging to its year-on-year highest in three years (since 1H 2018). A total of 72 deals amounting to US$614.2 million were struck for Singapore fintechs from January to June this year – this is a 22 per cent increase from 59 deals in 1H 2020 and 50 per cent higher than the 48 deals in 1H 2019, according to data from KPMG’s Pulse of FinTech, a bi-annual report on fintech investment trends. 

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While the number of deals transacted has certainly gone up, Singapore fintech firms are transacting smaller value deals compared to last year. Investors are still willing to broker deals at strong valuations for companies, but not to quite the same extent as they did in the past. Transactions in 1H 2021 for Singapore fintechs halved from 1H 2020’s total deal value of US$1.02 billion. A large part of 1H 2020’s total deal value had been from the US$856 million deal scored by Singapore-based company, Grab, during that period. That said, 1H 2021’s showing for Singapore is still an improvement from two years back – the deal value is double that of 1H 2019’s US$302.6 million.

The explosion of US-based special purpose acquisition companies (SPACs) in recent months also may help push valuations for the Singapore fintech landscape. Start-ups, including mature fintechs, in the Asia-Pacific region and hence also Singapore are expected to see more interest from US-based SPACs over the next six months. A case in point is Singapore-based super-app company Grab which announced the largest SPAC merger ever in 1H 2021. Once finalised in 2H 2021 (expected), its US$40 billion deal with US-based Altimeter Growth Corp is expected to set the stage for Singapore’s fintech investments to end the year on a high.

Singapore’s strong showing comes alongside a pick-up in fintech investments in the Asia-Pacific region for mergers and acquisitions (M&A), venture capital (VC) and private equity (PE), on top of deals activity in the first half of the year. After falling to US$4.7 billion across 357 deals in 2H 2020, total fintech investment and deals activity in the Asia-Pacific region saw a solid rebound in the first half of 2021. After falling to $4.7 billion across 357 deals in H2’20, H1’21 saw $7.5 billion in investment across 467 deals. While both deal volume and value remained well shy of the record $25 billion across 504 deals seen in H1’18, the increased activity — particularly without any megadeals — is a positive sign for continued fintech investment in the region.

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Overall global fintech funding across M&A, PE, and VC deals also soared to a new high in H2’21. Dry powder cash reserves, increasing diversification in hubs and subsectors, and strong activity across the world contributed to the record start to 2021, with funding increasing from US$71.9 billion in H2’20 to US$98 billion in H1’21. 

Fintech valuations remained very high in H1’21 as investors continued to see the space as attractive and well-performing – a likely driver in the explosion of unicorn births with 163 created in the first half of the year.

Under pressure to increase the velocity of their digital transformation and to enhance their digital capabilities, corporates were particularly active, contributing over $21 billion in investment over 550 deals globally, with many realising it’s quicker to do so by partnering with, investing in, or acquiring fintechs.

“Fintech is an incredibly hot area of investment right now—and that’s not expected to change anytime soon given the increasing number of fintech hubs attracting investments and growing deal sizes and valuations,” said Anton Ruddenklau, KPMG’s Global Fintech Co-Lead. “As we head into H2’21, we anticipate more consolidation will occur, particularly in mature fintech areas as fintechs look to become the dominant market player either regionally or globally.”