Singapore fintech deal activity rises amid declining investments in the first half of 2024, KPMG said Tuesday.

The firm said in its latest edition of “KPMG’s Pulse of Fintech for first half” that the country’s fintech deal count rose by 19 percent to 117 deals in the first half of 2024 from 98 deals in the second half of 2023, but total deal volume fell 34 percent to $522.89 million from $790.10 million amid economic uncertainties.

On the global stage, fintech investment fell from $62.3 billion across 2,287 deals in the second half of 2023 to $51.9 billion across 2,255 deals in the first half of 2024.

According to KPMG, the increased caution among investors, driven by high interest rates and economic uncertainties, has resulted in a tighter funding environment.

Consequently, there is a noticeable shift towards smaller, early-stage investments rather than large-scale deals.

In Singapore, this trend is evident with 52 early-stage deals, 32 seed rounds, 25 later-stage investments, and 5 merger and acquisition (M&A) transactions recorded.

“The reality is that the overall global investment total for the first half of the year was buoyed by a handful of large deals, several of which were take privates aimed at avoiding significant or further valuation loss,” said Anton Ruddenklau, Global Head of Fintech and Innovation, Financial Services, KPMG International.

“Meanwhile, the volume of early-stage deals globally has been thriving both because of the interest in new technologies, such as artificial intelligence (AI) applications, and newer business models to meet the changing nature of the financial services sector,

“The rise of ‘platforms’ continues to gain momentum as decentralization, data aggregation and ecosystem connectivity becomes mainstream,” he added.

Reflecting a cautious investment approach, blockchain and digital assets have seen increased regulatory scrutiny, showed the report.

The cryptocurrency and blockchain segments of Singapore’s fintech market recorded $211.90 million across 72 deals in first half of 2024, a 22 percent uptick from the $166.30 million over 38 deals recorded in the second half of 2023.

KPMG noted that Singapore has been focused on developing and enhancing robust risk management frameworks for digital asset tokenization, recently announcing an initiative to scale asset tokenization within financial services.

Globally, crypto and blockchain stabilized at $3.2 billion, despite previous declines.

While deal sizes were relatively small, deal volume remained good, with 677 deals completed during the first half of 2024 — well on pace to exceed the number of deals seen last year by a solid margin, said the report.

Meanwhile, the payments segment in Singapore secured the second-highest investment attracting $80.20 million across ten deals in the first half of 2024, though this marked a 78 percent decline from $142.65 million across 14 deals in the second half of 2023.

Notably, the largest payments deal in the Asia Pacific (ASPAC) region involved a $50 million venture capital raise by Singapore-based business to business (B2B) payments platform Nium.

Singapore’s payments activity includes dynamic payment architectures and cross-border payment solutions and embedded payments solutions.

On a global scale, the payments segment led fintech investment in the first half of 2024, drawing $21.4 billion.

The report also showed AI funding saw stabilization following its surge in the second half of 2023, with investments falling to $65.62 million across ten deals in the first half of 2024, down from $333.13 million over 14 deals.

The AI segment, characterized by complex technologies that necessitate substantial upfront investment and longer return timelines, has faced increased regulatory scrutiny.

This scrutiny has slowed the deal-making process as companies and investors adapt to new compliance requirements and economic uncertainties.

It is noted that over the past five years, the fintech sector in Singapore has experienced notable fluctuations.

The period before the pandemic saw slowing deal-making, followed by a post-pandemic surge, peaking at $3.27 billion in the first half of 2022.

However, recent economic headwinds have tempered this momentum, leading to smaller deal sizes and slower large-scale funding.

Despite this, there is optimism for 2025, with expectations of a backlog of fintech deals potentially rejuvenating the investment landscape, said the report.

Globally, only five $1 billion+ fintech deals occurred in the first half of 2024, including the buyouts of United States-based Worldpay for $12.5 billion, Canada-based Nuvei for $6.3 billion, United States-based EngageSmart for $4 billion, United Kingdom-based IRIS Software Group for $4 billion, and Canada-based Plusgrade for $1 billion.

The largest venture capital deal was a $999 million raise by United Kingdom-based Abound.

Despite the decline in total investment, regional deal volume showed promise.

While deal volume globally dipped slightly, the decline was driven entirely by a decline in deal volume in Europe, Middle East, and Africa (EMEA) — from 804 in the second half of 2023 to 689 in the first half of 2024.

Comparatively, the Americas saw deal volume rise from 1,066 to 1,123, while ASPAC saw it rise from 406 to 438 in ASPAC, suggesting underlying resilience.

“The high cost of capital and geopolitical uncertainty linked to conflict and elections, have put a significant damper on all global investments so far this year, and the fintech market isn’t immune to that,

“Investors are acting cautiously, not only when it comes to large transactions, particularly on the M&A front, given concerns about valuations and the profitability of potential targets, investors are focused on improving the companies they already own rather than buying new,” said Karim Haji, Global Head of Financial Services, KPMG International.

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