There were no significant outliers among APAC countries in the first half of the year as fintech investment fell in the China, India, Singapore, Australia and Japan. Both M&A and PE investments were especially subdued, with the former contributing US$300 million to deal value and the latter US$7.8 million. Further, KPMG has included one firm among the top 10 by deal value in APAC that are not traditional financial technology companies. Shanghai-based MioTech, which raised US$150 million in a Series C round, is described by PitchBook as “a provider of big data solutions intended to leverage artificial intelligence (AI) to provide users with sustainability and ESG data.”

We think there are several reasons fintech funding in Asia is experiencing a bit of a drought. First, the macroeconomic environment is challenging, with persistently high interest rates and mounting concerns about a possible recession in the United States. Second, most of the low-hanging fruit has been picked in the region’s major economies. To be sure, there are large markets like Pakistan and Bangladesh that have significant potential, but they face some political challenges. Third, investors want to see a clear path to profitability. They are less willing to bet big on companies that cannot show they are on this path.

The KPMG report noted that investor interest in AI remains high. However, there is a lot of uncertainty about how useful AI will ultimately be for financial services. In a recent report, Goldman Sachs noted that tech giants and others are set to spend over US$1 trillion on AI capital expenditure in coming years, with so far little to show for it.