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US-funded deals in APAC fintech firms more than double in 2021

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U.S. investors had the highest volume of investments in Asia-Pacific financial technology firms compared with any other country.
Source: Pixabay

The U.S. was the largest investor in financial technology firms in Asia-Pacific for the second straight year in 2021, with a strong interest in companies specializing in blockchain and artificial intelligence.

U.S. investors, led by venture capitalists, funded 358 fintech companies in the Asia-Pacific region in 2021, up from 134 in 2020, S&P Global Market Intelligence data show.

Venture capitalists are likely to continue to invest in the region's fintech space, as many are set to either exit via IPOs or expand through strategic acquisitions. Venture capital funding reached new highs in 2021, with Asia-Pacific fintechs receiving $15.69 billion. Such funding was up sharply from $5.87 billion in 2020 and was 74% higher than 2019's pre-pandemic levels.

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Banking tech investments on the rise

Global investors were most active in backing fintech companies specializing in investment and capital markets technology such as blockchain, internet of things and artificial intelligence, funding 254 deals in 2021 compared with 99 the year prior.

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Several mature fintech firms were active in the Asia-Pacific region. South Korea's lending app, KakaoBank Corp. of Kakao Corp., carried out a $1.1 billion rights offering while Australia's Judo Bank Pty. Ltd., focused on small and medium-sized enterprises, was listed on the ASX Ltd. in November 2021.

There is also growing interest in the potential role of blockchain technologies as a substitute for core banking systems in the financial sector. In Singapore, the financial regulator launched a trial of its blockchain and distributed ledger technology for clearing and settling payments and securities, named Project Ubin, in November 2016.

Examples of these transactions include American technology startup accelerator Y Combinator's investments in India's blockchain company, NextBillion Technology Pvt. Ltd. and Indonesia's online broking platform, PT Ajaib Sekuritas Asia. The U.S.-based investment firm was involved in 27 fintech transactions in the Asia-Pacific region in 2021.

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Payment platforms in focus

Payments was the second-most popular category for U.S. investors, as 167 companies received funding in 2021. Warren Buffett-owned investment powerhouse Berkshire Hathaway Inc. invested in Alibaba Group Holding Ltd. and SoftBank Corp.-backed One97 Communications Ltd., or Paytm, which became India's biggest ever IPO when it raised $2.47 billion in November 2021.

India's payment companies were a big focus for some U.S. investors. For example, Y Combinator and U.S.-based investment firm Tiger Global Management LLC both backed Razorpay Software Pvt. Ltd. in 2021 while Tiger Global funded Resilient Innovations Pvt. Ltd. which operates as BharatPe, and PhonePe Pvt. Ltd. The country's payment landscape has become increasingly competitive, with local industry giant Reliance Industries Ltd., Alphabet Inc.'s Google Pay and Facebook-owner Meta Platforms Inc. all vying for a share of the burgeoning market.

In particular, the buy-now, pay-later space in the region was hot, with notable transactions including Block Inc.'s $26.90 billion purchase of Australia's Afterpay Ltd. and PayPal Holdings Inc.'s $2.73 billion acquisition of Japan's Paidy Inc. in 2021.

Active India-based investors

India-based investors were a distant second in providing funding to fintechs in Asia-Pacific after the U.S. in 2021.

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The Indian venture capital arm of Sequoia Capital Operations, Sequoia Capital India Advisors Pvt. Ltd., contributed to the funding of Razorpay and Resilient Innovations as well as India-based cryptocurrency exchange aggregator Bitcipher Labs LLP and Australia's funds transfer platform Airwallex Pty. Ltd.

India also attracted the most funding in the region, with $5.94 billion raised across 236 deals in 2021, up from $1.5 billion across 118 deals in 2020.

Celeste Goh contributed to the article.