Singapore’s AI Funding Skyrockets, Fintech Remains Resilient Amid Global Funding Decline

In contrast, global fintech investments in the AI subsector experienced a slowdown, plunging from US$28.1 billion in 2022 to just US$12.1 billion in 2023. However, this decline in direct investment does not reflect a dwindling interest in AI. Many financial institutions and fintech firms worldwide have chosen to harness the power of AI through strategic alliances and product expenditure, rather than direct investment, throughout 2023.

On a broader scale, Singapore’s fintech sector amassed total funding of US$2.20 billion, inclusive of mergers & acquisitions (M&A), private equity (PE), and venture capital (VC) deals in 2023. This represents a substantial 68 percent decrease from the US$4.4 billion raised in 2022. Deal activity also saw a sharp decline, halving to 189 in 2023 from the previous year. This downward trend was particularly pronounced in H2’23, with funding falling by 64 percent, from US$1,455 million across 102 deals to US$747 million across 87 deals.

“The fintech market floundered somewhat in 2023, buffeted by many of the same issues challenging the broader investment climate. While there were still good deals to be had, investors were definitely sharpening their pencils—enhancing their focus on profitability,” said
Anton Ruddenklau, Global Head Fintech and Innovation, Financial Services, KPMG International. “While it was a depressed year for the fintech market overall, there were a few particularly bright lights. Proptech, ESG fintech, and investors embraced AI-focused fintechs—which helped particularly in the last six months.”

This marks the slowest performance for fintech funding since the Covid-19 year of 2020, when only US$1.13 billion was raised across 183 deals. The dampened investor sentiment can be attributed to geopolitical conflicts, a high interest rate environment, and a lacklustre exit environment across regions, which prompted fintech investors to exercise caution and conserve their cash reserves throughout 2023. Furthermore, the increased scrutiny of potential fintech deals, with an emphasis on profitability and avoidance of down rounds, further shaped the funding landscape in 2023.

Singapore Continues to Dominate Asia Pacific’s Fintech Landscape in 2023

Despite a widespread slowdown in the fintech sector, Singapore has emerged as a leader in the Asia Pacific region, accounting for a substantial 21 percent of all fintech deals in the area. This reinforces its reputation as a premier fintech hub in Asia.

The year 2023 saw some significant fintech deals in Singapore. A venture capital deal with digital bank AnextBank topped the list, raising an impressive US$359 million. Close on its heels was insurtech firm Bolttech, which secured US$246 million in funding.

Furthermore, the resilience and evolution of Singapore’s fintech sector in 2023 were truly commendable. In an environment fraught with challenges, investors shifted their focus towards early-stage companies, resulting in 74 deals, and seed funding, leading to 63 deals. These transactions were primarily responsible for smaller deal sizes.

This trend underscores a strategic move by investors to diversify risk while remaining committed to exploring, learning, and assessing the commercial viability of a diverse array of next-wave fintech business models.

Global Fintech Investment Trends and Top Deals in 2023: A Year of Challenges and Opportunities

The global fintech market faced a series of hurdles in 2023, as total investment dropped to a six-year low of US$113.7 billion across 4,547 deals, down from US$196.6 billion across 7,515 deals in 2022. However, the second half of 2023 showed slight resilience with a marginal gain over the first half, rising from US$55.5 billion in H1’23 to US$58.2 billion in H2’23.

This slight recovery was significantly bolstered by six notable deals exceeding US$1 billion each, including the acquisitions of Black Knight (US$11.7 billion) and Adenza (US$10.5 billion), a private equity raise by Finastra (US$6.9 billion), the buyout of Avantax (US$1.2 billion), and a venture capital raise by Generate (US$1 billion) along with the acquisition of Pismo by Visa (US$1 billion). Despite these highlights, VC investment experienced a downward trend, falling from US$27.5 billion to US$18.8 billion between H1’23 and H2’23.

Regionally, the Americas dominated the fintech funding landscape in 2023, accounting for nearly 70 percent of total investment (US$78.3 billion across 2,136 deals). The United States spearheaded this surge with an investment of US$73.5 billion. In contrast, the EMEA region received US$24.5 billion of total fintech investment across 1,514 deals, and the ASPAC region saw US$10.8 billion across 882 deals.

In terms of sectors, the payments space attracted the highest share of fintech investment globally (US$20.7 billion), albeit at a substantial drop from the US$58 billion in 2022. Meanwhile, proptech and ESG were very hot with investors. Proptech investment soared to a record high of US$13.4 billion in 2023, while ESG-focused fintech investment saw a significant year-over-year increase, rising from US$1.2 billion to US$2.3 billion.

Fintech investment in the Asia-Pacific Region Falls by More than 75 percent

It was an incredibly soft year for fintech investment in the ASPAC region, with only US$10.8 billion of investment across 882 deals in 2023—down from US$51.3 billion in investment in 2022—although the 2022 numbers were buoyed by the US$29 billion acquisition of Australia-based Afterpay. Fintech investment in India was particularly soft, falling from US$6.8 billion to US$3 billion between 2022 and 2023, although investment also dropped in Singapore—from US$4.5 billion to US$2.2 billion. Fintech investment in China rose year-over-year—from a ten-year low of US$800 million to US$1.9 billion. VC investment in the ASPAC region dropped from US$15.4 billion in 2022 to US$7.8 billion in 2023. Of this, corporates participated in US$4.1 billion of deals.

H2’23 was slightly slower in ASPAC, with fintechs attracting US$3.4 billion in investment. VC raises accounted for the vast majority of investment in H2’23, including by Hong Kong (SAR), China-based Micro Connect (US$458 million) and Singapore-based Boltech (US$246 million)), India-based Perfios (US$229 million), and Japan-based Gojo & Company (US$110.6 million).

Crypto Continues to Attract Singapore Investors Despite Challenges

Despite experiencing a decline from the previous year, the crypto/blockchain subsector remained the top fintech focus in Singapore in 2023. Investments totalled US$626.8 million across 88 deals, compared to US$1,169.8 million across 131 deals in 2022.

This indicates that even amidst a challenging environment, Singapore remains resolute in its dedication to progressing the crypto space. The nation strikes a careful balance between fostering innovation and implementing necessary regulations.

This commitment was particularly evident in H2’23. Singapore rolled out new requirements aimed at safeguarding customer assets held by Digital Payment Token providers. Additionally, the regulatory framework for stablecoins was finalised. This resulted in approvals being granted to Paxos and StraitsX to issue regulated USD and SGD stablecoins.