Fintech Funding For APAC In 2021 Predicted To Be Favourable

Fintech companies in Asia-Pacific (APAC) raised US$3.14 billion across 113 deals in Q4’20 (excluding capital raised by Grab and GoJek), the highest quarterly funding activity for the year. This signals a bright outlook for fintech funding and deal activity in 2021, including a slew of initial public offerings (IPOs) expected later this year, according to a new research by S&P Global Market Intelligence.

Several top-funded companies in APAC are set to go public in the coming year or so. Firms including PhonePe, KakaoBank, Judo Bank, Airwallex and Viva Republica have achieved unicorn status with valuations above US$1 billion and most have completed at least five capital raises since their inception.

KakaoBank from South Korea and Judo Bank from Australia are seeking to launch IPOs as early as 2021, while India’s PhonePe, a partial spin-off by Flipkart, is planning an IPO by 2023. Viva Republica, the operator of digital wallet Toss in South Korea, is eyeing a public listing in its home country, Hong Kong, the US, or a combination of two of these destinations in the next two to three years, and Chinese insurtech firm Waterdrop is reportedly working with Bank of America and Goldman Sachs for a possible IPO in the US.

Top funded fintechs in APAC in 2020 eyeing IPO, Source: S&P Global Market Intelligence, Feb 2021

In 2020, payment companies continued to get much of the traction as mature fintechs continued to expand beyond their core offering.

Established mobile payment firms including PhonePe, Viva Republica and Voyager Innovations, which owns PayMaya in the Philippines, closed mega-rounds of more than US$100 million, accounting for 38% of total investments in the payment sector.

These have all expanded into other financial verticals, with PayMaya and Viva Republica planning to use the proceeds to deepen their presence in financial services. Toss Bank, a consortium led by fintech firm Viva Republica, won preliminary approval for its Internet-only bank in December 2019, and is set to launch in H1 2021.

According to KPMG, investments in the payment space will continue to be hot in H1 2021, with large payments players consolidating to drive global scale, which will drive new mega merger and acquisition (M&A) deals.

2020 fintech funding in APAC by segment, Source: S&P Global Market Intelligence, Feb 2021

Banking technology was another key area of focus for investors in 2020. It was in fact the only fintech segment that saw growth in funding in 2020, rising 236% to US$1.6 billion, the S&P Global Market Intelligence report says. Notable deals included KakaoBank (US$661 million), CITIC aiBank (US$310 million, China), and Xinja Bank (US$433 million, Australia).

This trend came on the back of further regulatory changes and market liberation pushes by governments in Asia to welcome digital-first new entrants in the banking sector. Singapore announced the recipients of its four digital banking licenses, the Philippines introduced its new framework in November 2020 and Indonesia is reportedly working on similar regulation.

Difference in aggregate value between 2020 and 2019, Source: S&P Global Market Intelligence, Feb 2021

In 2020, APAC fintech companies raised a total of US$6.8 billion, down 33% from 2019. India topped fintech investments with US$2 billion raised, followed by China. Two of the five largest fintech deals in APAC in 2020 went towards Indian paytech firms: Navi Technologies, which raised US$397 million, and Pine Labs, which raised US$300 million, according to KPMG.

Despite uncertainties brought about by COVID-19, investors were still keen to bet on APAC fintech companies, with new investors joining in. Out of the 33 large funding rounds of US$50 million and above, more than half (19) saw participation from new investors, the S&P Global Market Intelligence report says.