Pulse of Fintech H2 2021 – ASPAC

In 2021, fintech investment in Asia Pacific reached US$27.5 billion with 1,165 deals.

In H2’21, fintech investment in Asia Pacific reached US$27.5 billion with 1,165 deals.

2021 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). Key H2’21 highlights from the Asia-Pacific region include:

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.

Total investment activity in fintech ASPAC

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.

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.

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 organizations 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.

Regulatory activity in China helps drive attention to other markets in Asia-Pacific

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.

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.

This article is featured in Pulse of Fintech H2’21.

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VC investment soars and M&A makes a big comeback.

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