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Fintech investment in the Asia Pacific region strengthens in second half of 2019

After falling to an eight-quarter low of $2.3 billion in Q3’19, total fintech investment in the Asia Pacific region rebounded quite strongly to end the year, with $4.1 billion in investment during Q4’19. While annual fintech investment fell well shy of 2018’s record-breaking year – which included a massive $14 billion raise by Ant Financial, total annual fintech investment in the Asia Pacific region remained relatively strong compared to all previous years.

Total investment activity in fintect - Asia Pacific chart

China issues 3-year plan to guide fintech development

During Q3’19, the People's Bank of China released a 3-year plan to support the development of the fintech industry in the country. Since then, there has already been a number of moves focused on implementation. For example, a fintech sandbox is in development, with testing currently being conducted in Beijing. It is expected that this plan will help fuel future investment in fintech, particularly in key areas like risk management, cybersecurity, big data, artificial intelligence, distributed databases and authentication.

China’s central bank and other authority bodies are working to move fintech in the country to ‘2nd half’ as part of their three-year fintech development plan. We anticipate an increased regulation and guidance for the industry and an enhanced infrastructure to support fintech development. For example, sandbox mechanism is being designed and may soon roll out to test the concept of different fintech to make sure they comply with regulations and will achieve the desired results before they enter the market.

Chris Wang
Partner and Head of Fintech
KPMG China

Alibaba’s listing a big win for Hong Kong (SAR) despite economic slowdown

Despite a recession and ongoing political unrest, the fintech market in Hong Kong (SAR) saw some resilience in Q4’19. In particular, the Hong Kong Stock Exchange (HKEX) was the busiest listing venue of 2019. It also saw the largest listing of the year in Alibaba’s secondary listing in November which raised $11.2 billion, well above Uber’s $8.1 billion IPO in May.

Earlier in 2019, Hong Kong (SAR) issued its first eight digital banking licenses. Of the licensees, ZhongAn was the first to launch a digital bank pilot, although others are expected to follow suit in 2020. As the licensees continue to formulate their digital bank offerings, Hong Kong (SAR) could see an upswing in investments in related areas, like KYC, regtech, digital onboarding and communications, and digital banking infrastructure. The issuance of digital banking licenses has also spurred traditional banks to improve their own digital offerings and digital experience. 

We’re starting to see ecosystems evolving with respect to digital banks. Partners are coming together to get digital banking licenses. Once they have their pilot projects underway, and they have proven their technology both internally and to the Hong Kong Monetary Authority, we’ll start to see them leveraging those partnerships more deeply — integrating banking services with other offerings like travel bookings or insurance to provide their customers with a seamless experience.

Avril Rae
Head of Fintech, Hong Kong (SAR)
KPMG China

Fintech investment in Singapore remains strong year over year

Fintech investment in Singapore remained relatively strong in 2019, despite a shrinking number of deals. Singapore’s announcement that it would issue a number of digital banking licenses garnered significant attention, and could spur a new wave of fundraising activity as successful companies look to build out their digital banks. One of the key differentiators with Singapore’s digital banking license is that the Monetary Authority of Singapore (MAS) is paying particular attention to companies that look at banking in a totally new way — who would use different tools and technologies to reach customers or to provide services and new products to underserved customers and segments.

They very concept of fintech is evolving right now. You see insurance-related companies issuing credit cards. You see technology companies applying for digital banking licenses. The lines between insurance, banking and technology are blurred, with the real focus being the customer.

Chia Tek Yew
Head of Financial Services Advisory,
KPMG in Singapore

Fintech investment in Australia continues to grow

Fintech investment in Australia remained robust compared to historical norms in Q3’19 and Q4’19, although well shy of the record $1.17 billion investment seen in Q2’19. The country has seen increasing interest in fintech and digital banking since the regulator changed its licensing regime. Since 2018, the country has seen a number of new digital banks take off, including 86 400, Judo Bank, Xinja, and Volt Bank. It has also seen increasing activity from traditional banks both domestically and abroad. For example, in 2019, Commonwealth Bank announced an investment in Sweden-based Klarna and plans to distribute its capabilities in the Australian market. Other financial institutions have announced similar partnerships and fintech investments — a trend expected to continue for the foreseeable future.

It’s been a record year for fintech investment in Australia. We’ve seen some strong IPO activity from a diverse range of companies, like online lender Prospa, B2B fintech Tyro Payments, and consumer credit business MoneyMe. This sends a great message to investors. But it’s not just fintechs driving change here. We’re also seeing the big Australia banks invest in fintechs both domestically and internationally in order to move their own capabilities forward.

Ian Pollari
Global Co-Leader of Fintech
KPMG Internatinal

India closes out 2019 with a record-setting quarter of fintech investment

Total fintech investment in India skyrocketed to a new high in 2019, propelled by a record Q4’19 which saw  $2.3 billion in fintech investment in the country. Payments continued to be the hottest areas of the fintech market in India, evidenced by Paytm’s $1.7 billion VC round in November. Insurance was also a hot ticket in 2019, with raises by PolicyBazaar ($152 million) and Acko General Insurance ($65 million). Fintech is expected to remain hot for the foreseeable future given the country’s large unbanked and underbanked population.

Trends to watch in Asia Pacific

Digital banking will likely continue to be a very hot area of investment in the Asia Pacific region in 2020, given that additional jurisdictions have shown intent to follow in the footsteps of Hong Kong (SAR), Australia and Singapore in terms of issuing digital banking licenses.

With the successful secondary listing of Alibaba in Hong Kong (SAR), other mature fintechs in China could look to the HKEX for their IPO over the next year. On the investment front, given China’s growing population, there is expected to be increasing interest in insurance products which is likely to help propel investment in insurtech offerings. Insurtech is also expected to be a growing area of investment in India.

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