Despite a global downturn in fintech investments, funding for artificial intelligence (AI) in Singapore's fintech sector surged in the second half last year to grow by 77% h-o-h to a total of US$333.13 million ($448.49 million) worth of deals taking place, in comparison to the US$148.08 million recorded in 1H2023.
This brings full year investment in this field to US$481.21 million across 24 deals, according to KPMG’s Pulse of Fintech report on Feb 6.
This upward trend for AI fintech investments in Singapore is in contrast to the global slowdown, which saw funding “plunge” from US$28.1 billion in 2022 to just US$12.1 billion in 2023, KPMG notes. It adds that this decline in investments does not reflect a dwindling interest in AI.
“Many financial institutions and fintech firms worldwide have chosen to harness the power of AI through strategic alliances and product expenditure, rather than direct investment, throughout 2023,” the release notes.
Meanwhile, the KPMG Pulse of Fintech highlights that Singapore has emerged as the leader in the Asia Pacific (APAC) region, as it accounted for 21% of all fintech deals in the region. Top of the list of venture capital (VC) deals is AnextBank, wholly owned by China’s Ant Group, with US$359 million, followed by insurtech firm Bolttech, which secured US$246 million in funding.
The country’s insurtech sector made a 194% increase in funding from US$284.1 million in 2H2023, from US$4.1 million in 1H2023. The sector has seen a strategic shift towards catering to the small and medium-sized enterprises (SME) market, but the success of these insurtech firms will hinge on their ability to navigate the inherent complexities of insurance products, says KPMG.
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The payments sector in Singapore however, saw a great drop in funding from US$984.78 million in 2022 to US$186.13 million in 2023. But KPMG maintains that the industry sustained one of the largest shares of fintech investments, with 24 deals in 2023, compared to 23 deals in 2022.
In addition, KPMG says that the crypto/blockchain sub sector remained a top fintech focus in Singapore in 2023, despite a decline from 2022. Investments this year totalled US$626.8 million across 88 deals, compared to the US$1.17 billion across 131 deals the year before.
The report also found that investors shifted their focus towards early-stage companies, resulting in 74 deals, and seed funding, leading to 63 deals. They note that this is a strategic move by investors to diversify risk.
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Broadly, APAC saw an “incredibly soft year” for fintech investments, as the total number of deals fell by more than 75%.
The region saw US$10.8 billion worth of investments across 882 deals in 2023—down from US$51.3 billion in investment in 2022. KPMG notes that the figures from 2022 were buoyed by the US$29 billion acquisition of Australia-based Afterpay.
While investments in India, Singapore and the broader APAC saw a drop in funding, China saw a y-o-y rise from a ten-year low of US$800 million in 2022, to US$1.9 billion in 2023.
VC raises accounted for the vast majority of investment in 2H2023, including by Hong Kong (SAR), China-based Micro Connect (US$458 million) and Singapore-based Boltech (US$246 million)), India-based Perfios (US$229 million), and Japan-based Gojo & Company (US$110.6 million).
Global funding in 2023
Worldwide, global fintech investment saw a drop from US$196.6 billion across 7,515 deals in 2022, to US$113.7 billion across 4,547 deals in 2023.
The global M&A deal value dropped from US$98.2 billion in 2022 to US$56.4 billion in 2023, while global VC investment declined from US$88.8 billion to US$46.3 billion y-o-y.
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Corporate-participating VC investment globally fell from US$45.9 billion in 2022 to US$25.2 billion in 2023, but private equity growth investment showed the most resilience, up from US$9.6 billion in 2022 to US$11 billion in 2023.
In the Americas, funding in the US accounted for US$73.5 billion of the US$78.3 billion in fintech funding. However in Europe, the Middle East and Africa, fintech funding dropped to a seven-year low of $24.5 billion in 2023.
On another note, KPMG finds that 2023 was the second-best year for fintech investment on record, with the US$2.3 billion in investment second only to 2021’s peak of US$3.7 billion.
The US accounted for the largest deals in this space in 2023, including US$1.1 billion deal by sustainable infrastructure startup Generate, a US$1 billion PE raise by carbon custody platform Rubicon Carbon, a US $525 million VC raise by environmental commodities firm Xpansiv, and a US$500 million raise by cleantech investment firm CleanCapital.
Finally, KPMG notes that with the ongoing geopolitical conflicts, ensuing high interest rate environments and continued lack of exits, global fintech investments is “expected to remain soft” heading into 1Q2024.
“The technology underpinning fintech keeps changing—and right now, we’re seeing it change again with the application of AI and generative AI,” said Karim Haji, global head of financial services, KPMG International. “You could say that we’re coming into the next wave of fintech. While the investment numbers are soft now—due to broader market conditions—the next year could be quite exciting for innovation in the fintech space.
