Fintech investment in the Asia-Pacific region reached an annual record high of $41.8 billion with 607 deals in the first half of the year, a report showed on Wednesday.
The region saw a diversity of jurisdictions attract good-sized deals, according to the KPMG in India report.
In the Asia-Pacific region, a number of fintech subsectors that attracted substantial interest and hype over the past 12 to 24 months cooled off considerably in the reported period, including retail payments, insurtech, and B2C solutions.
Crypto, NFTs and blockchain also came off the investment burner.
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"Regulators are continuing to focus on making industry changes more so in a country like India to support open banking and decentralised finance in an orderly and safe way," the report mentioned.
"The fintech space has witnessed a correction in valuation and investment flow globally as well as in India. Focus on building scale, has now been supplemented by a focus on cash flow and profitability," said Sanjay Doshi, Partner and Head, Financial Services Advisory, KPMG in India.
The Reserve Bank of India's recent guidelines on credit card licensing, digital lending could force many fintech companies especially loan service providers and non-regulated loan originators to revisit their business and operating model.
"This segment should see an increase in deal flow activity driven by investment flows in wealth tech, insure tech and M&A of Fintech NBFC's," said Doshi.
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Meanwhile, global investment in fintech fell to $107.8 billion despite robust VC funding.
The Americas accounted for the largest amount of VC funding ($27.2 billion), while EMEA set a new record high for a six-month period ($16.6 billion), the report mentioned.
Investment in the payments space remained very strong, accounting for $43.6 billion in investment compared to the $60.3 billion seen during all of 2021
Investment in the insurtech sector dropped considerably, with $3.8 billion of investment globally during H1 2022 -- well off pace to match the $14.8 billion in investment seen during 2021
The turbulence in the public markets globally had a major impact on the valuations of many public tech companies in H1 2022, including fintechs.
This, combined with other challenging market factors, brought IPO activity almost to a halt -- a trend expected to continue through H2 2022, said the report.
"2021 was a banner year for the fintech market globally, which makes the first half of 2022 seem slow by comparison," said Anton Ruddenklau, Global Head of Financial Services Innovation and Fintech, KPMG International.
