India draws $1.93 bn fintech investment in Q3; tops APAC: S&P Global

India continued to lead fintech investments in the Asia-Pacific (APAC) region with $1.93 billion raised across 66 deals in the third quarter of 2021, suggests a note by S&P Global Market Intelligence.

At an aggregate level, investments in Asian fintech companies surged 68 per cent sequentially to $5.47 billion in the third quarter, notching a new quarterly high since the first quarter of 2019 (Q1-2019). The volume of transactions also rose 21 per cent to 216 deals, the report said. VIEW GRAPH HERE

The growth in investments in APAC region's fintech companies, according to the note, was primarily on account of the rise in the number of transactions totalling $100 million in size. The shift towards digital channels, the report said, has been accompanied by increased valuations, which may in part be driven by improved fundamentals.

“However, it may also reflect private investors' willingness to pay higher multiples due to their bullishness in the fintech sector. That said, newly-listed APAC-based fintechs have so far seen positive reactions from public markets, which may encourage more fintech investments in the region. In particular, we expect Southeast Asia-based fintechs to attract more capital as venture capitalists raise new money to double down on technology investments in the region,” said Celeste Goh, fintech analyst at S&P Global Market Intelligence.

Meanwhile, fintech investments in Southeast Asia more than doubled on a quarter-over-quarter basis to $1.90 billion, according to the S&P Global Market Intelligence’s note, while deal volume grew by 32 per cent to 62 deals.

“While consumer-facing payment apps have dominated funding into the payment sector in the past, business-to-business payment fintechs have been attracting more investors' attention of late,” the note said.

Going ahead, experts see the fintech landscape changing rapidly in India as digitisation of customers and merchants opens up new possibilities for players to provide financial services.

Adoption of digital payments which accelerated by 1 per cent CAGR in value but 45 per cent CAGR in value over FY18-21, according to an Antique Stock Broking note, implies high use cases and could provide a host of insights in spending behaviour/need of a consumer and cash-flow of merchants which otherwise would have been tough to estimate based on document filings.

"Established players would continue to be major players in the near-term, especially banks in the context of deposit creation and lending and we expect a lot of partnerships to emerge. Newer solutions such as buy now, pay later (BNPL), SME financing by leveraging a huge merchant base, would have crossed the proof of concept stage and some regulatory oversight would develop. This would only intensify the competitive landscape and with time, a new financial system would emerge and may get divided into have (strong) and have not (marginalized) players," the Antique report said. VIEW FINTECH LANDSCAPE