Singapore fintech investments reach $614.2m in H1 with smaller deals

The total transaction value is smaller than in H1 2020 but deal numbers are at a three-year high.

Singapore’s fintech industry proved resilient with deal numbers for the first half (H1) of 2021 reaching a three-year high, according to KPMG.

A total of 72 deals amounting to $614.2m were transacted for fintech in the city from January to June 2021. This is 22% higher than the 59 deals during the first half of 2020, and 50% higher than the 48 deals in H1 2019, according to the latest KPMG Pulse of Fintech Report.

Dry powder cash reserves, increasing diversification in hubs and subsectors, and strong activity across the world contributed to the record start to 2021, KPMG said.

But whilst the number of deals went up, the total value was almost halved compared to H1 2020’s total deal value of $1.02b.

A large part of last year’s large total deal value had been from the $856m deal scored by super-app company Grab. The total deal value for H1 2021 is still higher than H1 2019’s $302.6m.

Smaller transactions
Singapore fintech firms are notedly transacting at smaller values compared to last year, KPMG found. 

“Investors are still willing to broker deals at strong valuations for companies, but not to quite the same extent as they did in the past,” it said. 

The smaller sized deals are reportedly in part due to pulling back in financing from corporates and their venture arms, given the degree of consolidation and emergence of clear category leaders across countries and regions. 

While corporates and their venture arms are still engaging in a decent number of rounds, these deals are smaller in size because the corporates are no longer joining in the mega-rounds of some of the largest companies, KPMG noted. Category leaders are already large enough that may not have the need to raise further capital, or may even have gone public already. 

“Consequently, there will also not be as many start-ups within that specific segment immediately due to the incumbents that are formidable competition,” KPMG added.

As a result, there has been a notable downward trend of investment figures by corporates and their venture arms in APAC. Corporates invested $24.9bin fintech in 2018, compared to $10.3b in 2019 and $7.9b in 2020. In 1H 2021, just $2.8b was invested.

SPACs spam Asian fintech
US-based special purpose acquisition companies (SPACs) may also change the Singapore fintech landscape, as they could help push up valuations. 

Start-ups, including mature fintech, in APAC, are expected to see more interest from US-based SPACs over the next six months, KPMG said. 

Already, Grab has announced the largest SPAC merger ever in the first half of 2021. Once finalised, its $40b deal with US-based Altimeter Growth Corp is expected to set the stage for Singapore’s fintech investments to end the year on a high.
 
Aside from Grab, Indonesia-based Gojek has also raised $300m and announced a merger with eCommerce platform Tokopedia for $18b to create the GoTo Group.

“Fintech is an incredibly hot area of investment right now—and that’s not expected to change anytime soon given the increasing number of fintech hubs attracting investments and growing deal sizes and valuations,” said Anton Ruddenklau, KPMG’s global fintech co-lead. 

“As we head into H2 2021 we anticipate more consolidation will occur, particularly in mature fintech areas as fintech look to become the dominant market player either regionally or globally,” Ruddenklau added.

Stronger APAC investments
Singapore fintechs’ strong showing came alongside a pick-up in fresh APAC fintech investments for mergers and acquisitions (M&A), venture capital and private equity. 

APAC investments soared to $7.5b across 467 deals in H1 2021, driven largely by venture capital activity.

India, China, and Australia led the pack when it comes to investments: India received $2b in total fintech investment, followed by China at $1.3b, and Australia at US$900m. 

Under pressure to increase the velocity of their digital transformation and to enhance their digital capabilities, corporates have been particularly active in venture deals, the professional services firm noted. Globally, firms have participated in close to $21b in investments and 600 deals.