China attracts $1.3 billion in fintech investment in best result since H2’19, finds KPMG analysis

Fintech investment in China increased from $900 million in H2’20 to over $1.3 billion in H1’21, achieving the best result since H2’19

Fintech investment in China increased from $900 million in H2’20 to over $1.3 billion...

Fintech investment in China increased from $900 million in H2’20 to over $1.3 billion in H1’21, achieving the best result since H2’19, according to KPMG’s Pulse of Fintech, a bi-annual report on fintech investment trends. Even though no mega VC deals were seen in China H1’21, the $100 million+ VC deals that occurred highlight the growing diversity of fintech startups attracting funding.

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Andrew Huang, Partner and Fintech Leader, KPMG China, says:

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China’s fintech market is incredibly mature next to many other jurisdictions, with investments in areas like payments really taking off a few years ago and a number of clear leaders emerging. Now what we’re seeing isn’t megadeals in those very mature areas, but rather an increasing number of smaller deals focused on less mature sectors of fintech — like B2B services, wealthtech, and insuretech.

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In H1’21, medical payments company MediTrust Health raised $155 million, wealthtech WeBull raised $150 million, asset data management firm Xuncetech raised $108 million, and B2B solutions provider XforcePlus raised $100 million. 

In Hong Kong meanwhile, the government also is set to adjust virtual asset exchange licensing rules.  The introduction of digital bank licenses has caused some of the more established banks in Hong Kong to up their game in terms of the user interface that they offer and the value propositions and how they go to market. 

Cryptocurrencies and crypto exchanges continue to attract attention in Hong Kong, with raises by Amber Group ($100 million) and Babel Finance ($40 million) in H1’21. Hong Kong has also seen increasing interest in the entire blockchain ecosystem from VC funds and family offices. While licensing of crypto exchanges is currently ‘opt-in’ based, during H1’21, the Hong Kong Financial Services and the Treasury Bureau found that all virtual asset exchanges should be licensed with services restricted to professional investors. Regulations to enact these rules are expected over the next year. This could affect crypto investments over the medium term and also Hong Kong’s status as a center for blockchain in Asia.

Barnaby Robson

Barnaby Robson, Partner, Deal Advisory, KPMG China, says:

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Hong Kong has become a centre and talent pool for blockchain and crypto in Asia. It’s an incredibly hot space for investment — and I expect to see significant M&A activity as CeFi players look to acquisitions to expand capabilities, and investors seek to tap into one of the most exciting and fastest growing asset classes.

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Overall global fintech funding across M&A, PE, and VC deals soared to a new high in H1’21. Dry powder cash reserves, increasing diversification in hubs and subsectors, and strong activity across the world contributed to the record start to 2021, with funding increasing from US$87.1 billion in H2’20 to US$98 billion in H1’21.  

Total fintech investment (M&A, VC and PE) and deals activity in the Asia-Pacific region saw a solid rebound in the first half of 2021. After falling to $4.7 billion across 357 deals in H2’20, H1’21 saw $7.5 billion in investment across 467 deals – in large part driven by venture capital activity.  

Looking forward to H2’21, total fintech investment is expected to remain robust in most regions of the world. While the payments space is expected to remain a dominant driver of fintech investment, revenue-based financing solutions, banking-as-a-service models, and B2B services are expected to attract increasing levels of investment. Given the rise in digital transactions, and the subsequent increase in cyberattacks and ransomware, cybersecurity solutions will likely also be high on the radar of investors.

 

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About KPMG China

KPMG China is based in 28 offices across 25 cities with around 12,000 partners and staff in Beijing, Changsha, Chengdu, Chongqing, Foshan, Fuzhou, Guangzhou, Haikou, Hangzhou, Hefei, Jinan, Nanjing, Ningbo, Qingdao, Shanghai, Shenyang, Shenzhen, Suzhou, Tianjin, Wuhan, Xiamen, Xi’an, Zhengzhou, Hong Kong SAR and Macau SAR. Working collaboratively across all these offices, KPMG China can deploy experienced professionals efficiently, wherever our client is located.

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