In 2024, Southeast Asia’s fintech sector showcased resilience, defying global funding trends with only a marginal 1% year-on-year (YoY) decline.
This figure stands in stark contrast to North America and Europe where funding plummeted by more than 30%, a new report by UOB, Pwc Singapore and the Singapore Fintech Association (SFA) says.
The 2024 Fintech in ASEAN report, which examines the fintech landscape in the six largest markets of the Association of Southeast Asian Nations (ASEAN-6), highlights the region’s ability to weather economic headwinds while maintaining stability.
It notes that globally, fintech funding continued its downward trajectory in 2024, declining for the third consecutive year. In the first nine months of 2024 (9M 2024), global fintech funding reached US$39.6 billion, falling by 28% YoY as inflation and geopolitical concerns continued to persist.
ASEAN-6 countries experienced a YoY drop of less than 1% to US$1.4 billion during the same period, showcasing the region’s resilience. In comparison, funding in North America and Europe, the two largest economic zones for fintech, fell by 35% and 34%, respectively.
ASEAN-6 fintech funding has grown significantly over the last decade, having surged by more than six times. Funding peaked in 2021, hitting US$6.4 billion.
Cumulatively, fintech funding in Southeast Asia attracted US$20 billion between 2015 and 9M 2024, excluding undisclosed deals.
Payment leads funding trends; Singapore maintains leadership
This growth was driven by the payments and alternative lending verticals, which make up more than half of ASEAN-6’s total funding during the last decade at US$6.5 billion and US$4.1 billion, respectively.
In 9M 2024, payments continued to lead funding deals, attracting 23% of total fintech funding in ASEAN-6. Blockchain in financial services followed closely, receiving 21% of the funding totals.
Alternative lending, meanwhile, faced a reversal of fortunes this year, with its funding share dropping from 41% in 2023 to 10% in 2024 amid rising interest rates.
In 9M 2024, Singapore continued to lead fintech funding, accounting for 53% of fintech funding amount and 62% of deal count in ASEAN-6. Thailand climbed to second position, accounting for 24% of funding thanks to Ascend Money’s US$195 million mega deal.
Indonesia, the perennial second place holder, dropped to third this year as the country saw a reduction in its share of the funding pie from 36% to 18% with no mega deals.
Early-stage startups shine
In 2024, investors put a focus on seed- and early-stage investments, with more than 60% of total fintech funding in ASEAN-6 directed to these stages. This trend was driven by large round of funding, including the two mega deals from GuildFi (US$140 million) and Longbridge (US$100 million).
Furthermore, half of the top ten funding rounds of 9M 2024 went to early-stage fintech startups, suggesting that investors are willing to bet on innovation at the foundational level. The backing also shows that ASEAN is still a breeding ground for new fintech ideas, which is a sign of long-term health.
The dynamism of the Southeast Asian fintech industry is also evidenced by the emergence of unicorns, reflecting the region’s rapid growth and maturing digital ecosystem. Currently, the region boasts 16 fintech unicorns, with Singapore leading the pack with six, followed by Indonesia with four.
Almost half of these companies are in the payments category (9), followed by alternative lending (3) and blockchain in finance (2) in second and third place.
GenAI, quantum computing, sustainability among key fintech trends
Looking at emerging trends, the report notes that ASEAN’s fintech industry is embracing cutting-edge technologies and sustainability, reflecting a maturation of the sector and signaling a new phase of development.
Generative AI (genAI), in particular, is poised to reshape the financial ecosystem significantly through enhanced customer experience, personalized financial advice and services, improved fraud detection and risk management, as well as automated financial planning, the report says.
Quantum computing, meanwhile, offers elevated processing power, transforming investment strategies, enhancing security through advanced cryptography algorithms, and improving risk analysis.
Finally, green finance is emerging as a key trend in ASEAN’s financial ecosystem, driven by both global and local demand. For example, Singapore has committed to issuing up to S$35 billion green bonds by 2030. Malaysia’s SRI Sukuk framework, meanwhile, is encouraging companies to fund environmentally sustainable projects.
Featured image credit: edited from freepik
