Asia-Pacific FinTech market value nears $10 billion mark

The Asia-Pacific region is witnessing exponential growth in FinTech investments, 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 known as FinTechs are attracting more global capital than ever before from venture capitalists, who sank $19 billion into such firms last year. The propositions of FinTech players, mostly start-ups, 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.

Prior to recent developments, North America has been the world’s hub for FinTech investment, hosting early forms of new payment systems, such as PayPal, were quick to rise to the status of unicorns (a start-up company valued at over $1 billion, so rare that it was previously believed to be the stuff of legends). Last year, however, investors in North American markets, began to look more critically at their portfolios of FinTech start-ups, as well as the criteria for future investment. A new analysis from Accenture – based on data gathered by CB Insights between July 2015 to July 2016 – has discovered that FinTech investments are now shifting away from North America to the rising economic powers of the Asia-Pacific region.

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, reaching $4.58 billion in investments, and considerably outstripped Europe’s $1.85 billion effort in the same period. The value invested was primarily sourced from a number of large investments, meaning North America and Europe still outstripped the region in terms of deal volume – however the firms located in the rapidly growing economic region were most coveted by investors, as they were more willing to put large amounts of money toward them.

Established players lead

The level of investment in the Asia-Pacific region are also highly skewed towards companies in the region’s quickest growing economies. The global powerhouses of China and Hong Kong, which, together accounted for $9 billion of the total. They were followed by India, who drew in almost $340 million in capital, while Australia & New Zealand saw $104 million and $3 million respectively. Japan, often seen as a technology frontrunner, saw a far slighter $68 million investment total.

The large values in China and Hong Kong, which accounted 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.

According to Beat Monnerat, a Senior Managing Director for Financial Services for Accenture Asia-Pacific, “CEO's of China’s established companies, rather than nascent start-ups, are at the forefront of the FinTech trend in the region. 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.”