Adrian JohnsonAsia Pacific saw a significant decline in fintech investment in 2023, with a decrease of more than 75% compared to the previous year, according to a report by KPMG. The region attracted $10.8 billion in investment across 882 deals in 2023, compared to $51.3 billion across 1,537 deals in 2022. The second half of the year saw slower investment activity, with fintechs attracting $3.4 billion in investment, compared to $7.4 billion in the first half.
The decline in investment was attributed to a stalled exit environment, particularly in initial public offering (IPO) markets in China and Hong Kong. Without viable exit opportunities, venture capital investors were hesitant to make significant investments. However, the report highlighted that artificial intelligence (AI) was a key area of interest for investors in the region, with a growing number of startups looking to utilize AI in wealth management, payments, and insurtech.
The report also noted that the fintech sector in China is no longer seen as an emerging industry, but rather a normal part of the financial services ecosystem. The country has a growing number of mature fintech companies with sustainable cash flows, reducing the need for large capital raises. In addition, there has been a shift in focus from disrupting financial services industries to enhancing the activities of financial institutions.
In terms of regulatory developments, the report highlighted the attention given to cryptocurrencies in the region. Several countries, including Japan and Singapore, have introduced regulations to govern the issuing of stablecoins. Singapore has also introduced new rules for digital payment token providers to safeguard customer assets. Looking ahead, the report predicts continued focus on AI integration in the financial services sector, expansion of China-based fintechs globally, and growth in insurtech and wealthtech.
