- Fundraising spiked in China in third quarter, but has been declining for much of the year, according to a CB Insights report
- Fintech firms raised US$4.1 billion through to the end of the third quarter, report says, a long way short of last year’s US$23 billion
Fintech funding in Asia could fall to its lowest level in more than four years despite a pickup in venture-capital backing driven by China in the third quarter, according to a new report by CB Insights, a global venture-finance data and analytics firm.
In the first nine months of 2019, there were 395 financial technology deals worth US$4.1 billion in Asia, with US$1.8 billion raised in the third quarter, the report said.
That is a long way short of the US$22.9 billion raised in the region last year and below the US$6.4 billion raised in the region in 2017 and the US$11.5 billion the year before that.
"Asia funding may fall to a four-year low if the pullback in China continues or if India deals cool down," CB Insights said.
If fundraising remains on its current trajectory, this year would see the lowest level of funding in Asia since the US$5.3 billion in the whole of 2015, according to the firm.
Globally, deals topped US$24.6 billion in the first nine months of the year, surpassing the US$18.8 billion raised in the whole of 2017, according to CB Insights.
"Deals rebounded slightly in (third quarter 2019) but are likely to fall short of 2018's record as a result of a continued pullback in early-stage investing," the company said. "Fintech deals in (third quarter 2019) grew 6 per cent from (second quarter 2019), but they have dropped in every quarter in 2019 when compared to the same time frame last year. Early-stage (seed/angel and Series A) deals fell to an 11-quarter low and funding hit a seven-quarter low."
Investors should prepare for 'low returns' as uncertainty hits growth
Ant Financial's US$14 billion fundraising sent global fintech funding to US$40.6 billion last year. Ant Financial is the operator of Alipay and an affiliate of Chinese e-commerce giant Alibaba Group Holding, the parent company of the South China Morning Post.
The Ant fundraising came soon after US authorities blocked a proposed US$1.2 billion deal by Ant to acquire Moneygram International, citing national security concerns.
The number of fintech deals in China had steadily declined since last year as a trade war between Washington and Beijing intensified, but spiked higher in the third quarter, according to CB Insights.
China had 55 deals worth US$661 million in the quarter, its highest level this year, but well below the 52 deals worth US$1.85 billion in the fourth quarter of last year. The value of fintech financing in the third quarter is down 41 per cent from US$1.12 billion in the same period a year earlier.
Trade war could make investing volatile next year: Goldman Sachs
US President Donald Trump has placed tariffs on hundreds of billions of dollars of Chinese-made goods as he tries to force China to change decades of industrial, technology and trade policy. The US has also increased its scrutiny of foreign investment, which has sharply reduced deals between Chinese and American companies.
Trump announced a "substantial phase-one" deal last month, but the two sides have yet to sign an agreement. China has been pushing the US to rescind tariffs as part of any deal and there remain disagreements over the amount of agriculture products China would buy and intellectual property protections.
In Southeast Asia, fintech funding surpassed US$701.4 million in the first three quarters of 2019, a record for deals, according to CB Insights. That compared with US$578.5 million in 2018.
In KPMG's latest fintech 100 report, China had three of the top 10 companies " Ant Financial, JD Digits and Du Xiaoman Financial " and Asia-Pacific accounted for seven of the top 10, including Indonesia's Gojek and Singapore's Grab.
"As fintech development continues to go strong in China, we are seeing some changes in China's fintech landscape," said Chris Wang, head of fintech at KPMG China. "Aligned with trends we observe globally, we see an increasing number of wealth, insurance and multi-sector companies in China on the list, which indicates that technologies and innovations have spread into more financial services sectors."
Wang also said the Greater Bay Area " driven by fintech companies in Shenzhen and a developing fintech ecosystem in Hong Kong " is becoming an important hub for the sector in China and "undoubtedly has a key role to play in the continuous transformation of financial services".
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