Singapore’s fintech industry hit a five-year high at 191 deals transacted in 2021, a 37 percent increase compared to 2020’s deal count (139 deals) and a 91 percent increase from 2019’s figures (100 deals), said a KPMG report on Tuesday.

Total transaction value in Singapore also surged by 59 percent year-on-year at $3.94 billion, across venture capital (VC), private equity (PE) and merger and acquisition (M&A) deals in 2021, up from $2.48 billion in 2020, according to the KPMG’s Pulse of Fintech report.

In total, global fintech funding across M&A, PE and VC reached $210 billion across a record 5,684 deals in 2021, of which fintech funding in the second half of 2021 accounted for $101 billion — down slightly from the first half (2021) of $109 billion.

According to the report, one significant deal involved Singapore tech group, Grab, which listed a special purpose acquisition company (SPAC) deal in the United States at $500 million, resulting in a post-money valuation of $39.6 billion that made it among the top four fintech investments in Asia Pacific in 2021.

The report also highlighted that payments continued to attract the most funding among fintech subsectors, accounting for $51.7 billion in investment globally in 2021 — up from $29.1 billion in 2020.

A continued surge in interest in areas, like ‘buy now, pay later’, embedded banking and open banking aligned solutions, has helped keep the payments space very robust, said the report.

Blockchain and crypto was also a very hot sector, attracting a record $30.2 billion in investment — up from $5.5 billion in 2020 and more than three times the previous record of $8.2 billion seen in 2018.

Cybersecurity ($4.85 billion) and wealthtech ($1.62 billion) also saw record levels of investment.

The report also noted that transaction volumes for fintechs in Singapore jumped close to twofold year-on-year to $2.98 billion in the second half of 2021, up from $1.04 billion in the second half of 2020.

Total number of deals in Singapore also rose by 36 percent to 95 deals in the second half of 2021, up from 70 deals in the second half of 2020. This surge can be attributed to Singapore’s measures to boost the capital market, such as its SPAC listing framework to position the country as a choice location for fast-growing companies and unicorns to go public in.

Overall, fintech funding in the Asia Pacific region grew to $27.5 billion in 2021. VC funding also bounced back — rising from $11.5 billion in 2020 to $19.6 billion in 2021.

India ($7.2 billion) and South Korea ($3 billion) both saw record high fintech investments during 2021, while investment in Australia ($2.6 billion) remained very robust.

“2021 has been an incredibly strong year for the fintech market globally, with the number of deals soaring to record highs across the board,” said Anton Ruddenklau, Global Fintech Leader, KPMG International, who is based in Singapore.

“We’re seeing an incredible amount of interest in all manner of fintech companies, with record funding in areas like blockchain and crypto, cybersecurity and wealthtech. While payments remain a significant driver of fintech activity, the sector is broadening every day,” he added.

Meanwhile, the report said that Singapore saw record levels of investment in crypto and blockchain with $1.48 billion transacted across 82 deals in 2021, as compared to $109.75 million over 26 deals in 2020.

The surging investment and deal activity reflects growing recognition for the potential role of crypto and its underlying technologies in modern financial systems. Majority of the crypto and blockchain deals for Singapore in 2021 went towards software and underlying infrastructure, rather than services.

This trend is mirrored in global investments in the crypto and blockchain space, which rose dramatically from $5.4 billion in 2020 to a record high of $30 billion in 2021, while the number of deals rose from 627 to 1,332 over the same period.

Across the Asia Pacific region, crypto and blockchain total deal value also increased from $386.28 million in 2020 to $3.14 billion in 2021, with the number of deals rising from 118 to 309 over the same period.

“Cryptocurrencies and blockchain are expected to remain very hot areas of investment in 2022, with more crypto firms looking to regulators to provide clear guidance on activities in order to help foster and develop the space. In Singapore, the surge in investments into crypto and blockchain have also outpaced that of payments which long held the top spot here,” said Anton.

“Given how many banks are beginning to see the major limitations inherent in their legacy architecture and technologies, we are also expecting a surge in investment into banking replacements able to help them rethink core banking services,” he added.

Meanwhile, the report showed that payments remain the hottest area of global fintech investment in 2021, with $51.7 billion in investments globally — up from $29.1 billion in 2020.

In Singapore, however, investments in the payment space at $628.41 million have fallen behind crypto and blockchain investments in 2021.

There was however a notable ninefold (946 percent) increase in payments-related deals locally, up from $60 million in 2020. A continued interest in areas like ‘buy now, pay later’, embedded banking and open banking aligned solutions have all helped keep the payments space robust.

The report also expects cryptocurrencies to receive continued attention from regulators in Singapore as the city-state tries to balance the benefits of financial innovation with any inherent risks associated with this space. This will include considerations on how infrastructure can be secured to protect the large amount of capital deployed in the crypto market, even as service providers aim to scale and innovate to attract more consumers into this market.

After falling to a seven-year low of $10.7 billion in 2020, the report said that cross-border fintech M&A deal value more than tripled year-over-year to $36.2 billion in 2021. The number of cross-border M&A deals also reached a record high of 275 deals during the year.

Heading into 2022, the report expects fintech investment to remain very robust, with activity growing in less developed fintech markets, including Africa, Southeast Asia and Latin America.

M&A activity is also expected to rise, with deal values growing as both corporates and fintechs look to grow and build scale.

There is also expected to be growing interest in fintech-focused environmental, social and corporate governance (ESG) solutions and banking replacements able to address the need for modernisation of core banking platforms. There will also be an increasing number of fintechs looking to brand themselves as data companies rather than simply fintechs.

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