The Asia-Pacific region has seen a boom in FinTech investments over the past six years, jumping from a mere 10 deals valued at $100 million in 2010 to 192 deals with a total value of more than $9.6 billion last year. While the region far outperformed North America and Europe combined, the high investment total resulted primarily from three multi-billion dollar funding rounds.
Financial technology companies, FinTechs, are globally attracting a growing amount of capital from venture capitalists – $19 billion last year. The propositions of FinTech players, mostly startups, are able to rapidly meet changing customer expectations while often vastly increasing operating efficiency, allowing them to sometimes disrupt markets to oust long standing incumbents.
North America has, for a long time, been the world’s hub for FinTech investment, early forms of new payment systems, such as PayPal, were quick to rise to the status of unicorns. Last year, however, investors in North American markets, began to look more critically at their portfolios of FinTech startups, as well as the criteria for future investment. A new analysis from Accenture, based on CB Insights data (measured from July 2015 to July 2016), finds however that FinTech investments are shifting away from North America to, among others, upcoming Asia.
FinTech investment booms in Asia-Pacific
Investment in FinTech companies in Asia has risen steeply since 2010, when there were 10 deals valued at $103 million. The intervening years saw a number of booms, with total value invested more than doubling between 2013 and 2014, FinTech Investment in Asia-Pacific on the rise from $434 million to $895 million, before skyrocketing the following year to $4.2 billion. In the most recent cycle, the year ending July 2016, total investment again more than doubled to $9.6 billion across 192 deals.
The total value for deals in the Asia-Pacific region was far higher than in North America, which saw $4.58 billion in investments, and considerably outstripped Europe’s $1.85 billion effort in the same period. The value invested in the Asia-Pacific was primarily the result of a number of large investments, with North America and Europe outstripping the region in deal volume.
Established players lead investment
The level of investment in the Asia-Pacific region are also highly skewed towards companies in China and Hong Kong, which, together accounted for $9 billion of the total. India had the second highest level of activity, drawing in almost $340 million while Australia & New Zealand saw $104 million and $3 million respectively. Japan, often seen as a technology frontrunner, saw $68 million in investments.
The large values in China and Hong Kong, which account for 90% of total funds raised, were largely the result of three mega fund-raising rounds, including online payments platform Alipay, that picked up $4.5 billion in a fundraising round in April; Lu.com, that completed a $1.2 billion round of fundraising in January; and JD.com, who raised $1 billion in new funding for its JD Finance subsidiary.
“CEO's of China’s established companies, rather than nascent startups, are at the forefront of the FinTech trend in the region,” says Beat Monnerat, Accenture Senior Managing Director for Financial Services across the Asia-Pacific. “FinTech companies with major backers such as Alibaba and JD.com are focussed on providing positive end-to-end customer experiences, which includes payments and lending. This is transforming China’s financial services industry and is consistent with the global ‘Fourth Industrial Revolution’, which is bringing innovation from non-traditional competitors to the financial services industry.”
Another recent study on the Asia-Pacific region, by Oliver Wyman, found that healthcare costs for elderly are set to jump from $500 billion to $2.5 trillion per year by 2030, while an analysis from AlixPartners unveiled that the demand for restructuring services in the region is on the rise.