Investment in Asia-Pacific’s fintech sector more than doubled during the first half of 2022, as a result of several large M&A transactions.
Despite total global investment in fintech and the total number of fintech deals falling between H2’21 and H1’22, APAC investment soared to a record $41.8billion during the first half of 2022 from $19.2billion recorded in second half of 2021.
According to the latest edition of KPMG‘s Pulse of Fintech, Asia-Pacific’s record figures were driven almost entirely by three large M&A transactions: the $27.9billion acquisition of Australia-based Afterpay by Block, the $2.1billion buyout of Japan-based Yayoi by KKR, and the $1billion merger of Australia-based fintechs Superhero and Swiftx.
The report also suggests that in many parts of the region, particularly outside of China, the aged infrastructure underpinning existing financial markets is driving a significant amount of investment towards the innovation of financial market infrastructure and to the digital last mile of transactions.
Andrew Huang, partner and fintech leader, KPMG China says: “Looking into 2022 2H, regulators in the region are continuing to focus on making industry changes to support open banking and decentralised finance in an orderly and safe way.
“Investors are taking a more focused approach to their investments, prioritising investments in companies with very strong business models and distinctive value propositions. Growing focus on B2B solutions and tech enablement of traditional players is expected, rather than standalone fintech plays, particularly in China.”
However, in the Asia-Pacific region, a number of fintech subsectors that attracted substantial interest and hype over the past 12 to 24 months cooled off considerably during H1’22, including retail payments, insurtech, and B2C solutions. Crypto, NFTs and blockchain also came off the investment burner as well.
Fintech investment in China remained limited during H1’22; the largest fintech deal in the country was a $140million raise by corporate expense management company Fenbeitong.
According to KPMG, digital transformation continues to be a significant government priority in China. During 2022 1H, The People’s Bank of China released its Fintech Development Plan (2022-2025), which stressed its commitment to appropriate regulation, privacy and data protection, low carbon and green fintech, and fair and inclusive financial services.
Barnaby Robson, partner, deal advisory, KPMG China, says: “Given the increasing pressure on valuations, we could see more M&A activity in 2022 2H as corporates look for good opportunities to buy out their competitors in less mature markets and startups look to consolidate in order to gain market share and improve their profitability.”
Key areas that garnered attention from investors in the Asia-Pacific region during 2022 1H included supply chain management, cybersecurity and privacy, identity management, and governance and compliance. Open data also saw solid investment during H1’22.