Investors shift focus to early-stage and AI-focused fintech firms

In 2H23, AI fintech funding in Singapore soared to US$333.13m.

Early-stage fintech companies and those focusing on AI technologies dominated the investment scene in the second half of 2023 (2H23).

Data from KPMG showed that AI fintech funding in Singapore skyrocketed to US$333.13m in 2H23, 77% higher than the recorded funding in 1H23.

Adding the 1H23 record, the total AI sector investment in 2023 in Singapore was US$481.21m across 24 deals.

On a broader scale, Singapore's fintech sector amassed total funding of US$2.20b, inclusive of mergers & acquisitions (M&A), private equity (PE), and venture capital (VC) deals in 2023. 

Compared with 2022, the 2023 total funding is 68% lower, marking the slowest performance for fintech funding since the Covid-19 year of 2020.

In 2023, deal activity also declined sharply, halving to 189 from the previous year. 

The downward trend was particularly pronounced in 2H23, with funding falling by 64%,  to US$747m 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 sharpening their pencils—enhancing their focus on profitability,” said Anton Ruddenklau, Global Head of Fintech and Innovation, Financial Services, KPMG International.

Whilst Singapore saw its slowest performance in three years, it still emerged as a leader in APAC fintech funding, accounting for 21% of deals in the region.

"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," KPMG said.

In Singapore, investors shifted their focus towards early-stage companies (74 deals) and seed funding 63 deals).

"These transactions were primarily responsible for smaller deal sizes," KPMG commented.

"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," KPMG added.