Asia Pacific

Fintech investment in ASPAC drops to $3.6 billion; Q2’24 slowest quarter since Q3’14

Fintech investment in the ASPAC region dropped from $4.6 billion in H2’23 to $3.7 billion in H1’24, despite a small uptick in deal volume from 406 to 437 deals over the same time frame. Much smaller deal sizes accounted for this decline; the largest deals in the region during H1’24 included a $280 million raise by China-based capital markets solutions firm Yi’an Enterprise, a $195 million raise by Thailand-based digital financial solutions company Ascend, and $150 million raises by China-based ESG financial solutions platform MioTech and Australia-based performance management firm Camms.

 Key H1’24 highlights from the Asia-Pacific region include: 

Fintech investment in ASPAC slows across the board as uncertainty remains high: Following broader investment trends in the region, Fintech investment in ASPAC remained weak in H1’24, with total investment declining in China, India, Singapore, Australia, and Japan. M&A and PE investments were particularly soft in the region during H1’24, with M&A accounting for just $300 million in deal value and PE accounting for just $7.8 million. Fintech investors remained quite cautious—particularly corporates, which leaned heavily towards cost and risk management during the quarter rather than on fintech investment.

Despite investment lull, innovation in financial services still a priority in China: Investment in China remained quite subdued compared to historical trends, with only $624 million in total investment during H1’24, compared to $754.6 million in H2’23. Despite the lull in fintech-focused VC, PE, and M&A investment, financial services continued to be a key priority for China’s central government, with five subsectors identified as priorities: technology finance, green finance, inclusive finance, pension finance, and digital finance. As part of this Five Finance strategy, China’s central government is working to encourage financial institutions to support startups in these spaces—which could lead to additional investments over time. ESG finance came under the spotlight somewhat in H1’24 given the $150 million raise by ESF finance company MioTech.

Fintechs focusing on AI value propositions; solutions still nascent: AI continued to grow on the radar of both fintech investors and fintechs, following a trend seen broadly both across ASPAC and globally. During H1’24, the AI focus came predominantly from traditional financial institutions looking to leverage AI to drive operational improvements and efficiencies. Fintechs in the region have also enhanced the emphasis of any AI components of their solutions and offerings, although many of these solutions remain quite nascent, with more sophisticated applications yet to come.

Business model sustainability becoming a critical focus for fintech investors: Prior to 2023, the fintech market in ASPAC was fairly frothy, even in smaller markets; in Australia, for example, a number of neobanks and other fintechs were able to raise money quite easily. Over the last year, however, with the cost of capital rising and investors growing more conservative with their investments, the sustainability of these companies has come intense scrutiny. This has driven an increasing interest in consolidation, some fintechs choosing to pivot away from their initial value propositions, and investors narrowing their funding to companies they believe can be profitable and sustainable long-term.