KPMG has just released its Pulse of Fintech report for the first six months of 2023, providing an analysis of global fintech funding.
Fintech funding in the Asia-Pacific region was soft during the
first half of 2023; it reached $5.1 billion with 432
deals, a decline from $6.8 billion in the second half of 2022.
This was a far cry from the first six months of 2022 when it
totalled over $45 billion, a new report by KPMG reveals.
The largest fintech deal in the region during the first half of
2023 was the $1.5 billion raise by China-based consumer finance
services company Chongqing Ant Consumer Finance, the firm said in
a statement. Other deals in the region during the quarter were
significantly smaller, including the $304 million buyout of
India-based SME lending company Vistaar Finance by PE firm
Warburg Pincus. There was also a $270 million raise by
Singapore-based credit services firm Kredivo Holdings, and a $200
million raise by India-based digital lending platform Creditbee.
Global level
On a global level, the first six months of 2023 were also quite
challenging for the global fintech market. Some of the challenges
were expected — high levels of inflation, rising interest rates,
the ongoing conflict between Russia and Ukraine, depressed
valuations, and a lack of exits; others were less so, including
the collapse of several banks in the US.
Both total fintech funding and the number of fintech deals
globally dropped from $63.2 billion across 2,885 deals in the
second half of 2022 to $52.4 billion across 2,153 deals in the
first half of 2023, the report reveals. Total funding in
wealthtech was incredibly soft, which was expected given the
range of factors driving uncertainty in the global market, both
within the fintech sector and beyond. The only $100 million+ deal
occurred in the US —the most mature of the wealthtech markets
globally, KPMG said.
Artifical intelligence
Looking ahead, Fintech firms are seeking ways to leverage
AI-generated content (AIGC). Following on from trends seen
globally, interest in AI has taken off in the Asia-Pacific
region, with both investors and corporates looking for ways to
leverage AIGC within fintech use cases, the firm continued.
In particular, there is strong interest in AIGC use cases which
focus on marketing and customer engagement in order to
upgrade customer experiences. While China has restricted access
to ChatGPT, the country’s tech giants, including Baidu, Tencent,
and Alibaba, all have their own large language models (LLMs). It
is expected that these LLMs could be used as a basis
for supporting AIGC use cases in the fintech sector heading
into the second half of 2023 and into 2024.
“A number of startups are focused on developing AI and AIGC use
cases for the fintech industry, but there have not been any
mature applications to date in the fintech space. That said,
there is enormous interest in AI, so more material AIGC-related
applications will likely begin to appear over the next six months
to a year,” Andrew Huang, partner, financial services, audit
at KPMG China, said.
Aside from the $1.5 billion raise by Chongqing Ant Consumer
Finance, fintech funding in China was remarkably dry during the
first half of 2023, with the second largest deal being a $45
million raise by instalment financing company OH Credit, the
report shows. The decline in funding in China most likely
reflects businesses prioritising their post-pandemic recovery,
including strengthening their business models and looking for
growth opportunities. Fintech investors in China have also been
taking a wait-and-see approach – expecting startups that
they have previously funded to prove their value and outcomes
prior to making further fundings, the firm said.
Managing logistics and supply chain finance was increasingly
important in Asia Pacific during the first half of 2023, and
it is expected to be equally important in the second
half of the year as traditional manufacturing companies and
others aim to increase efficiency across their end-to-end
operations.
“We are seeing divergent stances taken towards cryptocurrency
globally and within Asia Pacific. Hong Kong has announced a range
of measures to establish a strong crypto ecosystem, and approved
its first retail crypto exchange in August 2023, re-establishing
Hong Kong as Asia’s premier crypto hub,” Barnaby Robson,
partner, deal advisory at KPMG China, said.
In future, KPMG expects to see an increasing focus on ESG-focused
fintechs and green finance, as well as the use of AI and AIGC,
particularly in improving the customer experience. Moreover, the
space will see fintechs continue to concentrate on fintech
enablement rather than on direct competition.
