It was reported recently that the APAC fintech funding scene had experienced quite a slump in the first quarter of 2020. The 58.5 % dip is not much of a surprise, with the ongoing Covid-19 pandemic, U.S – China trade wars, supply chain disruptions and overall market uncertainties.
Asia Blockchain Review managed to check in with Celeste Goh, Fintech Analyst at S&P Global Market Intelligence. This is the second part of the interview with her.
It looks like payment companies led the pack in terms of capital raised, and investors have continued their interest in challenger banks too. Please tell us more about this.
Within the payment sector, mobile payment apps saw larger funding rounds and accounted for three of the top 10 transactions in the first quarter. These include South Korea’s NHN PAYCO which raised $64.4 million in January, India-based PhonePe which received $59.7 million in February and Japan’s Kyash which gathered $43.7 million in March.
Prior to the pandemic, mobile payments in APAC have already been gaining traction. In India, growth in mobile payments was driven by the launch of UPI, which is a real-time interbank payment system that facilitates instant funds transfer between bank accounts through a mobile platform.
South Korea and more recently Japan, have embarked on a cashless movement and this has generated greater interest in mobile payment solutions. Compared to US and Europe, challenger banks are relatively new in the Asia-Pacific region.
As regulators across various APAC economies are preparing to open the banking industry to technology players, investors’ interest in the Australian neobanks in lends confidence to digital banking as a viable business model and offers optimism to virtual banking contenders.
Cognizant of a subdued funding environment ahead, the focus of the Australia-based neobanks appears to be keeping a cap on cost to minimize cash burn as opposed to launching new product lines as planned. Xinja bank has pushed back the launch of its multi-currency card and has recently slashed the interest rate on its savings account from 2.25% to 1.8%.
Volt Bank has also announced its plans to delay the launch of its loan offerings. While issuing loans would be a source of revenue for the bank which is otherwise largely dependent on venture capital support, launching a loan business in an environment where credit quality is deteriorating may do more harm than good.
How is the situation in China, in terms of investments? What sectors are attracting the most investments right now? What’s the new normal like these days in China in terms of investor sentiment?
Fintech investments in China have seen a quarter-over-quarter growth of 21.9% in Q1 this year. As China resumes economic activity after showing signs of recovery from the COVID-19 outbreak, we saw month-over-month growth in both the dollar amount of fintech fund raises as well as deal count in March, which may be an early sign of improving investor sentiment.
During the first quarter, digital lenders and insurance technology firms pulled in the most capital with the sectors registering inflows of $58.9 million and $56.8 million respectively.
Having said that, the recent outbreak of COVID-19 cases in Beijing has sparked fears of a second wave of the pandemic which may reverse the cautious optimism observed in the first quarter.
Be sure to check out the 3rd part of our interview series with Celeste Goh soon!
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Anil started his career in journalism all the way back in 2003. After traversing the sphere of editorial, corporate communications and advertising, he has now come full circle and is back in the world of journalism. He believes in the power of the written word, and its ability to enthrall, delight and inform the reader.
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