Fintech Funding Flat In APAC

Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a neowealth disruptor in Australia

Venture funding in fintech unsurprisingly went quiet in the Asia-Pacific region during the first quarter of 2020. According to a report released by S&P Global Market Intelligence, funding was down by 58.5% compared to the prior quarter, coming in at $1.3 billion.

What happened in APAC in Q1 isn’t all that unexpected when looked at through a global lens. Across the world fintech funding dropped back to 2017 levels in the first quarter of the year, as investors shut up shop.

Most of the funding that was raised in the APAC region funnelled into India, which leapt in front of China in terms of both volume and deal value over the period. It’s the continuation of a trend that emerged in Q4 of 2019, where CBInsights reported that India had eked out a 1 deal lead over China, at 31 deals to 30.

In Australia, fintech funding concentration risk shot up during Q1, with neobanks Xinja and Volt accounting for 93.5% of all funds invested in the region.

Does the tail off in fintech funding mark the end of an era, or just a blip on an otherwise upward trajectory? Will funding momentum return with gusto, or, now that COVID-19 is squarely part of our lives, has the world has got bigger and nastier challenges compared to making it easier to switch banks, or get a loan online? Perhaps COVID-19 has been the final death knell for branch banking and slow paper based business loans, two aspects of traditional finance that have proven hard to unseat.

While what drives the future of the industry can be debated multiple ways,  what is factual is that millions of people and businesses across the world are still being propped up, for the most part, by welfare ‘life support’, thanks to emergency government handouts and furloughing schemes. We are months away from seeing or even really knowing how COVID-19 plays out economically, something that will continue to make many investors nervous. That and the fact financial markets are near insanity levels, and bankrupt companies like Hertz are being allowed to sell up to $1 billion in stock, even as the company itself admits any holding is most likely worthless.

Uncertainty and insanity will keep many investors on the bench for a lot longer. This will reduce the capacity of many existing unprofitable venture backed businesses to reach the valuations they need to avoid destruction of investor capital in the short term. Chances are deals in the space have the potential to get a lot sharper in the future, for those who are patient.

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