Investments in global fintech firms fell 3.7 per cent in 2019, hurt by a sharp decline in deal activity in China in 2019 against the backdrop of a bruising trade war between Washington and Beijing, according to a new report by the consulting firm Accenture.
Despite the steep fall-off in activity by Chinese companies, there were 3,472 deals worth US$53.3 billion globally last year, the second-highest value of investments since 2013, Accenture said. That compared with 3,251 investments worth a record-high US$55.3 billion in 2018.
Deal activity was marked in 2018 by Ant Financial Services, the operator of Alipay and an affiliate of Alibaba Group Holding, raising US$14 billion in the largest fintech investment that year. Excluding the Ant Financial deal, global fintech investments would have increased 29 per cent last year, according to Accenture. Alibaba is the parent company of the South China Morning Post.
“Despite strong demand for fintech globally, it’s likely that, as start-ups become more mature, investments will flow to fast-growing economies, where there’s still a huge, unaddressed consumer and corporate market thirsty for innovations,” said Julian Skan, a senior managing director in Accenture’s Financial Services practice.
Accenture used data from CB Insights, a global venture finance data and analytics firm, for its analysis.
Despite the future potential of emerging markets, fintech investors continued to favour the United States, which retained the crown as the biggest market for fintech deals worldwide last year. The value of deals in the US jumped 54 per cent to US$26.1 billion in 2019. Fintech investments in the United Kingdom rose 63 per cent to US$6.3 billion, while India, Brazil and Germany posted strong gains.
Investment in Asia is likely to increase in 2020 and some later stage fintech companies may seek to list their shares this year, driven by an “incredible growth” in the middle class and more people migrating to urban centres in the region, according to a report by Ecosystm, a technology research and advisory firm.
“While Asia may seem a mile away from financial institutions operating in most mature economies, the growth in investment in Asia will allow these technologies to put newcomers in a better position to disrupt the incumbents,” Paul Gestro and Amit Gupta, its co-authors, said in the November report. “With fairly open government policies through most of Asia and a generally underdeveloped banking sector that allows innovation to flourish, scaling up will happen fast and if you blink you will miss out.”
In China, the number of fintech investments fell 38 per cent to 216 transactions last year, compared with 348 deals in 2018, Accenture said.
The overall amount of fintech investments in China was US$1.9 billion in 2019, compared with US$25.5 billion in the prior year. Excluding the Ant Financial transaction, fundraising in China still dropped 83 per cent last year.
“Venture capital investments are cyclical, so it’s not unexpected that they may decline after a period of record volumes or very intense activity,” said Albert Chan, Accenture’s Greater China financial services lead, adding that there were hardly any mega deals there in 2019.
The largest fintech deal in China last year was the US$145 million financing of insurtech Shuidi Huzhu in June. Four deals, including the Ant Financial transaction, accounted for nearly US$20 billion in investment in China in 2018.
Fintech deals in Singapore more than doubled to US$861 million in 2019, with 39 per cent of investments going to payments start-ups, according to Accenture. Singapore had deals worth US$365 million in 2018.
Hong Kong saw its fintech investments nearly to double to US$374 million in 2019 as the city issued licences to its first virtual banks, which are expected to make their debut later this year, Accenture said. That compared with US$188 million in 2018.
The largest deal in the city was US$156 million raised in December by WeLab, which won a virtual banking licence in Hong Kong last year.
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This article Global fintech deals declined 4 per cent in 2019 as China investments fell sharply, report says first appeared on South China Morning Post