Fintech market in Asia-Pacific may slow down: KPMG study

‘Focus has shifted from scale to cash flow, profitability’

September 07, 2022 08:48 pm | Updated 09:57 pm IST - Bengaluru

Picture for representation.

Picture for representation.

The Asia-Pacific region, which includes India, could see a considerable slowing down in fintech activities, compared with the record-high growth seen in 2021, due to rising inflation, increasing interest rates and continuing geopolitical uncertainty, said KPMG on Wednesday.

The Asia-Pacific region received fintech investments to the tune of $41.8 billion in 607 deals in the first half of calendar 2022.

However, verticals such as retail payments, insurtech and B2C solutions, Crypto, NFTs and blockchain have witnessed cooling off during H1. Especially, areas that saw significant investment interest during the height of the COVID-19 pandemic have lost some attractiveness, as per Pulse of Fintech H1 2022 released by the firm.

While investment in areas that saw significant interest during the height of the COVID-19 pandemic have lost some attractiveness, areas that align with rapidly evolving global issues — including rising inflation, increasing interest rates, geopolitical uncertainty, and supply chain woes — have continued to see investment in India and other countries in the region., according to the study.

Sanjay Doshi, Partner and Head, Financial Services Advisory, KPMG in India said, “The fintech space has witnessed a correction in valuation and investment flow globally as well as in India. Focus on building scale, has now been supplemented by a focus on cash flow and profitability.’‘

Recent regulatory changes had an impact on the operating and revenue model of fintech players, he observed. For instance, the Reserve Bank of India’s recent guidelines on credit card licensing, and digital lending could force many fintech companies, especially loan service providers and non-regulated loan originators to revisit their business and operating models.

The H1 period, also saw challenges affecting the broader investment market, including turbulence in the public markets, the report further stated.

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