Investments into Singapore headquartered fintechs rose sharply in the months of April and May 2020, reversing a quiet first quarter as investors made larger bets on businesses relevant in the current environment.
Total equity funding reached a record high of S$462m in 2020 YTD despite the COVID-19 crisis, reflecting strong investor confidence in the sector, according to a BCG FinTech Control Tower (FCT) analysis of FinTech equity funding data.
The first-half of the year has also seen a high-level of M&A activity, with total deals exceeding S$185m. Examples include Grab’s acquisition of Bento, a B2B robo-advisor and digital wealth technology provider, GoBear’s acquisition of AsiaKredit, a consumer lending platform targeting unbanked consumers in SouthEast Asia, as well as AMTD Group’s acquisition of CapBridge, a private capital platform and Policypal, which allows users to compare and purchase insurance online.
The increase in investments is led by FinTechs in the Small Medium Enterprise (SME) banking and Technology business lines, which rose by ~210% and ~180% respectively over the same period last year.
From a product vertical perspective, Payments and Lending drove a significant portion of the increase in notably SME banking. Combined, the two clusters of SME banking and Technology attracted approximately S$288m, accounting for ~60% of the total equity funding to date in 2020.
The total number of FinTech deals have fallen marginally to 41 from 44 in the first five months of 2020 compared to the same period last year. However, the average deal size has increased by ~20% with investors rallying behind FinTechs to accelerate growth, as the demands for financial activities to move online in South East Asia hit critical mass, a sentiment echoed by
Yinglan Tan
Yinglan Tan, Founding Managing Partner Insignia;
“With our second fund of US$200M closed last year in 2019, we are exploring this new wave of “holistic” digitalisation in South East Asia, where platforms cross-pollinate digital services across sectors. As many day-to-day transactions are moving online, consumers and businesses are demanding for the entire gamut of financial services to be online as well. This demand, strengthened in a world of social distancing, is being met by Fintech platforms designed for the digital-first or digital-only customer, with the likes of fully digital banks or dedicated asset management and business banking applications.”
Reflecting this trend is a ~30% decrease in investment in seed/early stage FinTechs, while mid-stage Series C+ funding jumped by ~180% to S$177m, as investors target relatively more mature FinTechs well positioned to accelerate their growth during this period. This is in line with BCG FCT observation that the FinTech sector in Singapore has begun to reach a more mature state of growth as noted by Pauline Wray, Managing Director and Global Lead of BCG FinTech Control Tower
Pauline Wray
“As COVID-19 accelerates the move to digital, part of the recovery will mean that technology will become more prevalent in our everyday lives, this is especially true in financial services. FinTechs across the world have injected a new lease of life to financial services by supporting the financial industry as they provide value -added services and products to both new and existing customers. The 5-year effort since the first supportive policies by MAS is now coming to fruition as the FinTech ecosystem is maturing in Singapore too.”
