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.
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.