Asia-Pacific beats North America in fintech investment: report
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Chennai: Fintech ventures in China and Hong Kong have attracted $9 billion in investment so far in 2016, while those in India attracted $339 million, according to an Accenture analysis of data from CB Insights.
Total investment in Asia-Pacific’s financial technology sector reached $9.62 billion as of July 31, more than twice the $4.26 billion invested in the region in all of 2015.
“China’s established companies, rather than nascent start-ups, are at the forefront of the fin-tech trend in the region,” said Beat Monerrat, a senior managing director at Accenture’s financial services practice in Asia-Pacific.
The top 10 investments in Asia-Pacific fintech ventures occurred in China and Hong Kong, accounting for 90% of overall investments in the region.
Ant Financial Services Group, the financial-services affiliate of e-commerce giant Alibaba Group Holding that operates China’s online-payments platform Alipay, closed a $4.5 billion fundraising round in April.
Also, Lufax (Lu.com) — backed by Ping An Insurance Company of China Ltd, completed a $1.2 billion round of fund-raising in January and in the same month, China’s second largest e-commerce company JD.com raised $1 billion in new funding for its consumer finance subsidiary, JD Finance.
“Fintech companies with major backers such as Alibaba and JD.com are focused 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,” added Monerrat.
India too is expected to see explosive growth in the sector.
A KPMG report published in June pointed out that the traditionally cash-driven Indian economy has responded well to the fin-tech opportunity, primarily triggered by a surge in e-commerce and smartphone penetration. The Indian fin-tech software market is expected to touch $2.4 billion by 2020 from a current $1.2 billion, according to NASSCOM.
The latest report released by Accenture also highlighted that in recent years, major Alibaba affiliates and China’s biggest social network company Tencent, have also invested in other smaller start-ups, such as micro-loan site Fenqile, an electronics retailer called Qufenqi that lets buyers pay in monthly instalments, and India’s One97 Communications, parent of Paytm.
“The fintech trend in China continues to skew toward online payments and lending, including peer-to-peer (P2P), which is creating market-share dilution for banks,” said Albert Chan, managing director of financial services China, Accenture.
“China’s banks, whether building their own competitive platforms or not, should consider investing in collaborative fin-tech ventures in order to remain competitive,” Chan said.
Though investments in the fin-tech sector in the Asia-Pacific region have exceeded North America and Europe (which attracted $4.58 billion and $1.85 billion respectively, as of July 31), deal volume remains higher in the matured markets, the report said.
The increase in Asia-Pacific can be tied to big investments in a select few fin-tech companies in China. There have been 192 deals in Asia-Pacific so far this year, versus 509 in North America and 230 in Europe.