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Written by: Nik Faiz Nik Ruzman, Journalist, AOPG.

In the world of fintech, it’s not always about how big the deals are, but how many punches you can throw.

Despite a dip in overall investment, Singapore’s fintech scene is proving that when the going gets tough, the tough get going. In a recent KPMG report, the study finds the paradoxical situation that’s looming around the fintech’s growth in Singapore.

But should this be a concern? With a 19% surge in deal activity, the Lion City is showing the world that it’s not the size of the dog in the fight – it’s the fight in the dog.

Singapore’s Fintech Scene: Small Deals, Big Hopes

A graph generated by KPMG showcasing the half-yearly fintech funding in Singapore in US dollars (million) from 2019 to 2024, illustrates a bell curve with a peak in 2021 and 2022, followed by a gradual decline.

Singapore’s fintech scene has always been a playground for innovation and growth, but recent numbers suggest a shift in the wind. The first half of 2024 saw a sharp drop in the value of fintech investments, with total funding slipping 34% to USD $522.89 million compared to H2’23. Yet, in a twist that would make any financial analyst sit up, deal activity surged by 19%. That’s right more deals, but for less money. So, what gives?

This uptick in deal activity, hitting 117 deals in H1’24, up from 98 deals in H2’23, paints a picture of resilience. Singapore’s fintech ecosystem seems to be doubling down on its efforts, churning out smaller, earlier-stage investments like they’re going out of style. Early-stage deals accounted for a hefty chunk of this, with 52 deals going to startups still finding their footing. It’s a clear signal that investors aren’t retreating, but rather, just reformulating their approach.

So, what does this mean for Singapore’s fintech future? In simple terms, it’s a tale of cautious optimism. Investors are clearly still in the game, albeit with a sharper eye on risks. And while the high-value mega-deals might be off the table for now, the increased volume of smaller deals suggests a sector that’s bubbling with potential.

Cryptocurrency & Blockchain: Is the Future Already Here?

A table generated by KPMG showcasing the Crypto’s performance in the fintech sector of Singapore from H1’23 to H1’24.

It’s impossible to talk about fintech without diving into the world of cryptocurrency and blockchain, and Singapore is no exception. This segment is booming, racking up USD $211.90 million across 72 deals in H1’24. That’s a solid 22% increase from the previous half-year period. While the world might be treading cautiously around digital assets, Singapore’s fintech firms are clearly charging ahead!

But what’s driving this growth? For one, Singapore is making waves with its forward-thinking approach to regulation. With initiatives aimed at scaling asset tokenisation within financial services, it’s clear that the city-state is betting big on blockchain as a key component of its fintech future.

Yet, this enthusiasm doesn’t come without challenges. Regulatory scrutiny is ramping up, both globally and locally, which means companies need to play by the rules or face the consequences. But if there’s one thing that fintech has proven, it’s that innovation often thrives under pressure.

So, while the rest of the world takes a wait-and-see approach, Singapore is ploughing ahead, laying the groundwork for a future where digital assets are part and parcel of the financial ecosystem!

Payments Sector: When Size Doesn’t Matter

A table generated by KPMG showcasing the Payments’ performance in the fintech sector of Singapore from H1’23 to H1’24.

The payments sector in Singapore is what we can consider a cornerstone of fintech that’s seen its own set of ups and downs. In H1’24, Singapore’s payments sector attracted USD $80.20 million across 10 deals. Sure, that’s a steep 78% drop from the previous half-year, but the numbers don’t tell the truth of the story!

Here’s the twist: The largest deal in the APAC region came from none other than Singapore’s own B2B payments platform, Nium, which secured a USD $50 million venture capital raise. This single deal is a testament to the strength and potential of Singapore’s payments landscape. It’s also a signal that while the big bucks might be on hold, the sector’s infrastructure is anything but stagnant!

Singapore’s focus on dynamic payment architectures and cross-border solutions is laying a robust foundation for future growth. In a world where digital payments are becoming the norm, the city-state is positioning itself as a leader in this space. So, while the figure might seem disappointing at first glance, the underlying trends suggest a sector that’s far from being in decline!

AI in Fintech: A Sleeping Giant?

A table generated by KPMG showcasing the AI & ML deals’ performance in the fintech sector of Singapore from H1’23 to H1’24.

Artificial Intelligence (AI) has been the darling of the tech world for a while now, and its impact on fintech is undeniable. However, Singapore’s AI investment saw a significant dip, falling to USD $65.62 million across 10 deals in H1’24, down from a whopping USD $333.13 million in H2’23.

But let’s not get hasty to hit the panic button just yet!

The reality is, that AI in fintech is still a relatively new frontier, and with new frontiers come challenges – namely, regulatory scrutiny and long return timelines. But that doesn’t mean the sector is losing steam. On the contrary, the dip in investment could well be a temporary blip as companies and investors adjust to new compliance requirements and the economic uncertainties that have anyone treading carefully.

What’s more, AI’s potential to revolutionise financial services is still very much on the table. With the right investments and regulatory frameworks in place, we could see a resurgence in this space sooner than you might think. For now, it’s a waiting game, but don’t be surprised if AI makes a strong comeback in Singapore’s fintech scene soon!

The Global Picture: A Tale of Two Halves

Looking beyond Singapore, it’s clear that the global fintech landscape is facing its own set of challenges. Total global investment in fintech fell from USD $62.3 billion in H2’23 to USD $51.9 billion in H1’24. That’s a sizeable drop, but it’s not all doom and gloom! Deal volume in the Americas and APAC increased during this period, suggesting that while the big-ticket deals are on pause, smaller, more frequent investments are keeping the engine running.

In the Americas, fintech deal volume rose from 1,066 to 1,123 deals between H2’23 and H1’24, and APAC followed suit, with deal volume rising from 406 to 438 deals. Meanwhile, EMEA saw a decline, but even here, there’s a silver lining – early-stage deals are providing a glimmer of hope for the second half of the year!

So, what’s the takeaway? While the global fintech market is undoubtedly facing headwinds, the underlying resilience is hard to ignore. With Singapore leading the charge in deal activity, there’s every reason to believe that the city-state’s fintech sector is well-positioned to weather the storm and come out stronger on the other side!

2025: Can Singapore’s Fintech Business Roar Back to Life?

Looking ahead, there’s cautious optimism that 2025 could be a year of rejuvenation for Singapore’s fintech scene. The smaller deal sizes and slower funding in recent times might just be the calm before the storm. With a backlog of fintech deals potentially waiting in the wings, there’s hope that the next year could see a resurgence in both deal value and volume!

But let’s not get ahead of ourselves. The reality is that the high-interest-rate environment and global economic uncertainties are likely to keep things subdued for a while longer. However, if the first half of 2024 has shown us anything, it’s that Singapore’s fintech sector is nothing if not resilient. With the right mix of innovation, regulation, and strategic investments, the city-state could very well be on the brink of a fintech renaissance!

So, look alive – the future is still visible for a brighter path. In fact, it might just be gearing up for its biggest comeback yet!

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