Total funding into FinTech startups in Southeast Asia (SEA) fell 74 percent to $229 million in the third quarter of 2023 from $887 million a year ago, making it the lowest funded quarter since 2020, Tracxn said Friday.

The global software as a service (SaaS)-based market intelligence platform said in its “Geo Quarterly Report: FinTech SEA – Q3 2023” report that the drop in funding was largely due to the absence of late-stage rounds in the third quarter of 2023.

As compared to the second quarter, the funding also fell 48 percent from $437 million.

According to Tracxn, the SEA FinTech startup ecosystem received its highest funding in the fourth quarter of 2021. However, the region started witnessing a steady decline after the second quarter of 2022.

It said the market for investments remains volatile globally and similar trends have been observed in the SEA region as well.

The drop in funding, therefore, can be attributed to several factors that have affected the SEA economy, including the rising interest rates, macroeconomic factors and fear of reduction in startup valuations, declining global demands for manufactured goods, early onset of El Niño impacting agriculture, among other reasons.

According to Tracxn, FinTech sector secured early-stage funding worth $203 million in the third quarter of 2023, 37 percent lower than the $321 million raised in the second quarter of 2023 and a decline of 55 percent from $452 million in the third quarter of 2022.

Meanwhile, seed-stage investments in the third quarter of 2023 stood at $26.3 million, a drop of 27 percent compared with $36.2 million raised in the second quarter of 2023, and a plunge of 73 percent from $98 million raised in the third quarter of 2022.

It is noted that cryptocurrencies, insurance information technology (IT) and investment tech were the top-funded sectors in the third quarter of 2023.

Cryptocurrencies received a funding of $71.5 million in the third quarter of 2023, which is a fall of 4 percent compared to $74.4 million funding in the second quarter of 2023 and a drop of 8 percent from the third quarter of 2022.

Internet first insurance platforms, payments and alternative lending, on the other hand, were the most affected segments in third quarter of 2023 in this space, with a plunge of 100 percent, 69 percent and 87 percent, respectively compared with the funds raised in the second quarter of 2023.

According to Tracxn, no new unicorns emerged from this sector in the third quarter of 2023, similar to the previous quarter and the corresponding quarter last year.

Further, no $100 million+ rounds were observed during this quarter.

Meanwhile, no new companies went public in the third quarter of 2023, while one company had an initial public offering (IPO) in the third quarter of 2022.

Six acquisitions took place in the third quarter of 2023, a growth of 20 percent from five acquisitions in the third quarter of 2022.

It is noted that East Ventures, Y Combinator and 500 Global are the most active investors in this space.

Y Combinator, Hashed and Binance Labs were the top investors in seed-stage rounds for the third quarter 2023.

Patamar Capital, Lightspeed Venture Partners and Peak XV Partners, on the other hand, were the most active investors in early-stage rounds in the third quarter of 2023.

“Despite the challenges, there is considerable optimism in the region’s long-term growth, owing to factors such as a young population, a large consumer base, its dependency on informal financial and commercial systems and initiatives by the government,” Tracxn said.

Funding into FinTech Indonesia startups plunges 94 percent in the third quarter

Total funding into FinTech startups in Indonesia also fell 94 percent to $21 million in the third quarter of 2023, compared with $352 million in the third quarter of 2022, according to Tracxn.

The sharp decline in funding in the third quarter of 2023 is due to the absence of late-stage investments in the third quarter of 2023.

The funding is also 7 percent lower than $22.5 million raised in the second quarter of 2023.

It is noted that Indonesia is the second-largest economy in SEA after Singapore and is also the second-highest-funded startup ecosystem in SEA till date.

Tracxn said that the FinTech sector in Indonesia is currently showing a downward trend in funding with only $343 million raised in overall 2023, this is the lowest funding the sector has seen in the last five years.

Indonesian companies in this space secured seed-stage funding worth $1 million in the third quarter of 2023, an 87 percent drop from $7.5 million raised in the previous quarter and a 94 percent decrease from $15.8 million in the corresponding quarter last year.

No new unicorns emerged in the Indonesia FinTech space in both second and third quarter of 2023, as against one new unicorn in the third quarter of 2022.

Further, only one acquisition took place in the third quarter of 2023.

Meanwhile, payments and investment tech were the only funded sectors in the third quarter of 2023.

The payments segments in the third quarter of 2023 raised total funding of $20 million which is a 33 percent increase from the second quarter of 2023.

However, this is a 92 percent drop from $250 million when compared with the third quarter of 2022.

Investment tech sector, on the other hand, secured funding of $1 million in the third quarter of 2023, 82 percent lower than $5.5 million raised in the third quarter of 2023.

There was no funding in the second quarter of 2023 in this space.

East Ventures, Mandiri Capital Indonesia and Alpha JWC Ventures are the most active investors in the Indonesia FinTech landscape.

Iterative was the most active investor in the seed stage during the third quarter of 2023, while SWC and XCV were the most active early-stage investors.

“Investors are exercising caution in light of the global macroeconomic slowdown, which has had an impact on funding opportunities across various regions,

“However, the government of Indonesia is working towards improving its startup landscape, by running its own startup studio called Startup Studio Indonesia and multiple other initiatives,” Tracxn said.

Funding into FinTech Vietnam startups soars 190 percent in the third quarter

Conversely, total funding into FinTech startups in Vietnam rose 190 percent to $29 million in the third quarter of 2023, compared with $10.4 million in the third quarter of 2022, according to Tracxn.

The funding is also a massive jump of 2800 percent from $1.1 million raised in the second quarter of 2023.

However, Vietnam’s FinTech startup ecosystem has seen a significant impact of the global funding winter, receiving just $35 million in funding year to date, an 84 percent drop from the same period last year.

No late-stage rounds were observed in the third quarter of 2023.

The FinTech sector attracted early-stage investments worth $28 million in the third quarter of 2023, a growth of 1300 percent when compared with $2.5 million raised in the third quarter of 2022.

Seed-stage funding in the third quarter of 2023 stood at $1.1 million, similar to the second quarter of 2023 but a fall of 86 percent from $8 million raised in the third quarter of 2022.

Alternative lending, banking tech and insurance IT were the top-performing segments in the overall Vietnam FinTech sector in the third quarter of 2023.

Companies in the alternative lending space raised $12 million in the third quarter of 2023, compared with no funding in the second quarter of 2022, and a 100 percent growth from $6.4 million raised in the second quarter of 2022.

There was no activity in terms of IPOs and unicorns in the third quarter of 2023.

No companies from the Vietnam FinTech space went public in the third quarter of 2023, and no new unicorns emerged.

Further, only one acquisition took place in the third quarter of 2023, as against one in the second quarter of 2023 and none in the third quarter of 2022.

Among the cities, FinTech companies based in Ho Chi Minh raised $17.1 million, while those in Hanoi raised $12 million.

Y Combinator, Thinkzone, and Resolution Ventures were the most active institutional investors in this space in the third quarter of 2023.

Y Combinator, Resolution Ventures, and ThinkZone were the top investors in seed-stage rounds in the third quarter of 2023, while Peak XV Partners, JAFCO Asia, and Patamar Capital were the top investors in early-stage rounds in this sector.

Tracxn : SEA tech startups witness lowest quarterly funding in five years