The global fintech market continued to face challenges in the first six months of 2023 — high levels of inflation, rising interest rates, the ongoing Russia-Ukraine conflict, depressed valuations and a lack of exits were expected; others were less so, including the collapse of several banks in the US.
Total fintech funding and the number of fintech deals globally dropped from US$63.2 billion across 2,885 deals in H2’22 to US$52.4 billion across 2,153 deals in H1’23. In the Asia Pacific, fintech funding softened from US$6.8 billion in H2'22 to US$5.1 billion in H1'23.
Following global trends, interest in artificial intelligence took off with investors and corporates seeking ways to leverage AI generated content (GC) within fintech use cases. In particular, there is strong interest in AIGC use cases focused on marketing and customer engagement to upgrade customer experiences.
Whether you’re the CEO of a large financial institution or a founder of an emerging fintech, it’s critical to consider how your company can grow sustainably and profitably even in these uncertain times. Read our Pulse of Fintech H1'23 report for insights on how you can position your organisation to weather today’s storms while positioning for long-term success.
The fintech landscape in Singapore
Singapore's H1’23 fintech funding fell to US$934 million across 84 deals in mergers and acquisitions, private equity and venture capital — a 41% fall from US$1.6 billion across 17 deals in H2’22, echoing global analysis. H1'23 performance in Singapore reflects a three-year low but has alongside a dip in late-stage funding, in the face of rising interest rates and economic headwinds. Investors embraced payments, crypto, as well as artificial intelligence and machine learning deals, which were the top three funded verticals in the fintech space.
Generative AI generates investor interest
Artificial intelligence (AI) and machine learning funding attracted six deals amounting to US$129 million in H1’23 locally, signifying the nascent growth of generative AI application, particularly in the areas of cybersecurity, insurtech and wealthtech. Similar to H1’22 and H1’21 trends, Singapore’s top funded fintech sectors were payments (US$119.6 million across eight deals) and crypto (US$234.7 million across 36 deals) in the first half of 2023. In the payment space, Singapore-based Thunes raised the largest round in the ASPAC region, amounting to US$60 million.
Within the crypto space globally, Singapore has gained prominence among investors and start-ups as a forerunner. This comes as the nation moves ahead with regulations such as the Payment Services Act and Digital Token Payment Act and works to regulate the issuance of stablecoins that are pegged to a single currency.
Growing confidence in payments, crypto and AI
While the interest rate environment remains high, investors have a keen eye on the potential of AI-linked application for payments and crypto with the expectation that these projects can help solve problems and bring in solid returns. This indicates a strong vote of confidence in the space which has driven fintechs to remain nimble despite the current economic environment, adjust burn rates and extend funding pathways.
Download the full report for more regional and global insights.
It is still very early days when it comes to the application of generative AI to use cases in financial services. But looking forward it is an area that is attracting enormous interest and funding — particularly in areas like cybersecurity, regtech and wealthtech. Over the next six months, we’ll start to see an uptick in investors embracing the space as corporates demand ways to leverage generative AI effectively.
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