In H1’20, the biggest fintechs in Asia continued to gain ground, while smaller fintechs struggled for profitability and to attract new investments.
Southeast Asia was the hottest region for fintech investment in H1’20, led by a US$3 billion raise by Indonesia-based platform provider Gojek and an US$886 million raise by its Singapore-based competitor Grab. Both platform providers are actively expanding their payments services in the region. In January 2020, Grab acquired robo-advisor Bento, while Gojek acquired offline payments and cloud point-of-sales (POS) company Moka in April 2020.
The increasing activity of platform players and large tech giants in the fintech space across Asia showcases how the lines between fintech and other sectors are blurring. In H1’20, Google, Tencent, Facebook and PayPal were all involved in Gojek’s funding round, while Facebook announced a US$5.7 billion equity investment in India’s Reliance Jio, which launched both direct e-commerce and Whatsapp platforms in H2’20.
Regulation to shape the future of fintech was a critical focus in H1’20 in Asia.
Singapore introduced the Payments Services Act, legislation that includes regulatory requirements and a licensing program for cryptocurrency exchanges.
Hong Kong (SAR) created an opt-in regulatory framework for Digital Asset Exchange, although the licenses are only available to exchanges that deal with at least one security.
As a result of COVID-19, Australia re-opened submissions to its Select Committee on Financial Technology and Regulatory Technology, a senate committee tasked with reviewing fintech and regtech activities and identifying ways to support sustainable sector growth, in order to understand how the pandemic is affecting fintechs and how the government can best support them.
The ongoing US-china trade tension is likely to accelerate the focus by Chinese technology groups on Southeast Asia, as investments in the US, India and Europe become more challenging.
COVID-19 is resulting in a concentration of capital into companies that are well known and at later stages, in part because it is difficult to diligence earlier-stage companies remotely. As such, there will be a reduction and localization of Seed and Series A investments.