India has surpassed China as the top recipient of fintech investment in Asia for the first time, according to a report from CB Insights covering the second quarter. Regional fintech deals and funding are expected to fall short of last year’s levels partly due to a significant drop-off in China.

Why it matters: China has been at the forefront of fintech adoption and growth.

  • However, sectoral investment activity has been quiet so far this year—a stark contrast from the substantial investments and mega deals seen in the last two years.
  • Stricter regulation of online lending and other consumer finance areas have contributed to the plunge.
  • Countries undergoing rapid digital transformation, such as India, are increasingly attracting investors’ attention.

Details: Deals in China’s fintech sector fell 81% in Q2 to a five-quarter low of 15.

  • India, which saw 23 deals at VC-backed companies, surpassed China as Asia’s fintech hub.
  • In terms of investment, China saw $375 million in funding, slightly ahead of India’s $350 million.
  • Investment activity in Asia’s fintech sector dropped to near-historical lows, the report states, while funding grew steadily globally to hit $8.3 billion.
  • The market intelligence firm noted that the fall in deal activity has been more severe in China compared with India.
  • Latin America topped both China and India in fintech funding in Q2, with 23 deals worth $481 million.

Investors say ‘capital winter’ will prune China’s overheated tech sector

Context: The slowdown in investment activity in China has not only been observed in fintech but also in the broader tech sector.

  • China is overcoming the so-called “capital winter” that has been compounded by political and economic uncertainties as well as the government’s ongoing efforts to reduce financial risks.
  • Another report on fintech investment released by KPMG earlier this month noted that a lack of megadeals in China was the main driver of the decline in investment activities, which also affected the broader industry across the Asia Pacific region.
  • Alibaba fintech affiliate Ant Financial raised $14 billion in a funding round in the second quarter of last year. The amount was nearly as much as all fintech investments in the US and Europe for the whole of 2018.

Nicole Jao

Nicole Jao is a reporter based in Beijing. She’s passionate about emerging trends, news, and stories of human interest within the world of technology. Connect with her on Twitter or via email: nicole.jao.iting@gmail.com.

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