Asia Pacific Venture Capital Market Trends

The current pandemic is leading to increased access to (and need for) digital banking services. As many as 50% of APAC's consumers are unbanked; 70% are either underbanked or unbanked. 70% of SME merchants accept only cash in 2019. The Covid-19 outbreak has drastically accelerated APAC's shift to a cashless world, with unprecedented growth in the number of e-payment transactions amid a sharp decrease in cash withdrawals and deposits. Banking, digital payments and loan-financing services greatly propelled the economic wheel forward throughout the lockdown. Since many fintech firms are startups, their agility to pivot their operations to provide specialized services as customers needed them strengthened the industry.

Despite the pandemic-induced disruptions, venture capital funds pumped $2.7 billion into domestic fintech companies in 2020, the second-highest fund infusion into the sector since 2019 when it had peaked at $3.5 billion. Payments remained the hottest area of investment, followed by tech-driven insurance firms and tech-driven wealth managers. Competition in the insurance space started to heat up as incumbent insurers enhanced their digital focus due to the pandemic and niche payments players worked to expand into insurance. In addition to payments and platform models, B2B solutions, including embedded finance and 'buy now, pay later' solutions, will likely be a hot investment area in 2021. That apart blockchain is also expected to gain traction as blockchain-based solutions and digital asset offerings become more mainstream.