Singapore's fintech industry sees 3-year record of 72 deals worth US$614.2m in H1

SINGAPORE (THE BUSINESS TIMES) – Singapore’s financial technology (fintech) industry saw a three-year high in deals transacted in the first half of this year, thanks to corporates speeding up their digital transformation.

The sector saw some 72 deals worth US$614.2 million (S$833.3 million) transacted in the six-month period ending June 30, which is a 22 per cent increase year on year from 59 deals struck last year, and 50 per cent higher than the 48 deals made in the first half (H1) of 2019, according to data from KPMG in its report on the industry released on Tuesday (Aug 10).

The analysts note this to be in line with global trends of corporates ramping up their venture and investment activity after coming under increasing pressure to accelerate their digital transformation and to enhance their digital capabilities.

KPMG said firms recorded some 600 deals worth US$21 billion globally.

In Singapore, fintech firms are transacting smaller value deals compared with last year, with the total amount transacted in H1 2020 topping US$1.02 billion. A large part of this deal value can be attributed to the US$856 million Grab deal closed last year. That said, the deal value of US$614 million transacted in H1 2021 is still double that recorded in the same period two years ago, which was US$302.6 million.

This trend, KPMG said, is consistent with a pullback in financing from corporates and their venture arms in view of consolidation and the emergence of clear category leaders across countries and regions.

Corporates, they added, are no longer participating in mega-funding rounds of the largest companies – these larger firms are also more likely no longer in need of capital, or have already gone public.

KPMG does project that valuations for the Singapore fintech landscape could see upward climbs in the coming six months in view of the explosion of US-based special purpose acquisition companies (Spacs), which are expected to take greater interest in Singapore start-ups here.

An example, of course, is Grab’s history-making US$40 billion Spac merger with Altimeter Growth Corp, expected to be completed by the second half of this year.

Another is Gojek’s US$300 million H1 2021 funding round, as well as its US$18 billion merger with e-commerce platform Tokopedia to form the GoTo group.

Turning to the types of fintechs most commonly targeted, KPMG reports that payment companies have enjoyed the top spot in investors’ wallets globally, also clocking in the highest in deal value (US$19 billion in H1 2021) by far among all other fintech segments.

Finance solutions embedded into retail apps and ecosystem platforms, as well as the “buy now, pay later” sub-sector, have attracted significant investor interest.

Another flagged segment to watch for is cryptocurrency and blockchain, where fintech firms in this arena have chalked up deals worth US8.7 billion in the first half of this year, KPMG said, noting that significant inflows of institutional money into the sector reflects a widening investor base, awareness and knowledge of crypto assets and its operational aspects.

On the whole, KPMG projects “very robust” fintech investment trends in “most regions” of the world, although in view of increased numbers of digital transactions, cyber-security solutions will also come up on the radar of investors.

“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 KPMG global fintech co-lead Anton Ruddenklau.

“As we head into H2 2021, we anticipate more consolidation will occur, particularly in mature fintech areas as fintechs look to become the dominant market player either regionally or globally.”

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