Priority of innovation in China’s financial sector is likely to drive further investment
HONG KONG SAR – Media OutReach Newswire – August 23, 2024 – Fintech investments in China recovered slightly towards the end of 2023 and continued into 2024. Among the top 10 fintech deals in ASPAC, five were from mainland China and Hong Kong China. Despite China’s regulatory issues, fintech is likely to remain a durable investment option, according to KPMG, with bright spots in crypto, consumer payment systems and lending platforms. Pulse of Fintech H1’24 report.
Fintech investment in the ASPAC region totaled $3.8 billion across 438 deals in H1 2024, with China investing a total of $624 million in fintech. Consumer finance and lending companies contributed over half of the deal value in the first quarter. China saw the largest deals in the region in H1 2024, with capital markets solutions company Yi’an Enterprise raising $280.9 million. This was followed by $209 million raised by India-based personal lending platform KreditBee and $195 million raised by Thailand-based digital financial solutions company Ascend.
The ASPAC region has been more focused on the development and adoption of digital currencies and the tokenization of digital assets in the real world. Major centers such as Hong Kong, Singapore, and especially Japan have worked to balance innovation and regulation in a way that protects investors’ rights, and these jurisdictions will continue to explore and approve activities that combine traditional finance with decentralized finance.
AI continued to move onto the radar of fintech investors and fintechs, following a trend seen both in the ASPAC region and globally. In the first half of 2024, the focus on AI was primarily among traditional financial institutions looking to leverage AI to drive operational improvements and efficiencies. Fintechs in the region have also placed emphasis on AI components of their solutions and offerings, although many of these solutions are still quite young and more sophisticated applications are yet to come.
Andrew Huang, Head of Fintech, KPMG China, says: “A number of financial institutions in China have introduced AI-driven applications, such as digital customer service providers and AI robots that help answer questions. Some have also started using generative AI internally to help assemble computer code for software design and other limited use cases. In the second half of 2024, we will likely see further growth in this type of activity, much of it with the help of fintechs, but it will likely take some time for any applications to truly mature.”
Under the Five Finance strategy, the Chinese central government is working to encourage financial institutions to support startups in technology finance, green finance, inclusive finance, pension finance and digital finance – which could lead to additional investments over time. ESG financing came into the spotlight in the first half of 2024, as ESG financial solutions platform MioTech raised $150 million.
Barnaby Robson, Head of Value Creation, KPMG China, says: “Although transaction volumes remain relatively low, we feel that sentiment around fintech is changing for the better. In mainland China, efforts are being made to better integrate international payment providers into Chinese payment ecosystems, and some companies are already obtaining payment licenses.”
Despite the regulatory uncertainties in the cryptocurrency space on the mainland, fintech is likely to remain a durable investment option, with bright spots in the cryptocurrency, consumer payment systems, and lending platform sectors. Cryptocurrencies remain an important investment option as blockchain is positioned as a strategic technological innovation in the 14th Five-Year Plan (2021-2025).
Meanwhile, Hong Kong is actively working on developing a regulatory framework to support cryptocurrency exchanges and other crypto-related activities. In the first half of 2024, the Hong Kong Monetary Authority launched the next phase of its e-HKD pilot project. The city aims to position itself as a global hub for digital assets and has launched initiatives to attract crypto companies and improve its financial ecosystem.
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Mainland China and Hong Kong account for half of the ten largest ASPAC fintech deals in the first half of the year