Sustainability is garnering significant investor interest in ASEAN despite uncertain macroeconomic conditions in 2023, with green financial technology (fintech) firms bringing forth innovative solutions to help businesses and governments address challenges and opportunities of going green. This insight was drawn from the FinTech in ASEAN 2023: Seeding the Green Transition report by UOB, PwC Singapore and the Singapore FinTech Association. It was launched at the Singapore FinTech Festival on 6 November 2023.
Singapore retained its podium position within the region, securing US$747 million in fintech funding, or 59% of total funding in ASEAN. Though this was a decrease of over 65% year-on-year, Singapore still attracted 51 deals, the highest in the region.
In 2023, Singapore and other ASEAN fintech firms had continued to face the same funding winter seen globally. Fintech investments in the six biggest ASEAN economies (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam) came to US$1.3 billion in the first nine months, which was a sharp decrease of around 70% compared with the same period in 2022, when there was a post-pandemic surge.
Despite ongoing macroeconomic concerns, fintech has been integrated into the daily operations and lives of firms and people. And, with the climate challenge requiring stronger concerted effort across all industries and governments, there will be opportunities for green fintechs and sustainable finance in the future.
Sustainability is one area that is attracting significant investor interest in ASEAN as well as globally. ASEAN’s green technology sector received US$169 million in funding from January to September 2023, and investments for this sector have been on an uptrend over the last five years. Interest in sustainability solutions grew due to increasing climate-related regulations, government support, and rising awareness of environmental issues. The Asia-Pacific region is one of the most vulnerable to climate-related impact, and many governments in ASEAN have begun exploring green financing initiatives and regulations to support the region’s energy transition efforts. Businesses surveyed by UOB echoed the importance of going green, along with the benefits. Investors have projected carbon emissions management and reporting, as well as green financing solutions, to be key growth areas for this sector.
Among the six biggest ASEAN countries, Singapore and Indonesia accounted for more than 86% of total fintech funding and 80% of funding deals in ASEAN. Indonesia contributed to 27% of funding and 16% of the total deals worth US$340 million, largely driven by one mega deal. Vietnam and Malaysia experienced a modest increase in their share of number of deals by the third quarter in 2023, recording a six-percentage point and four-percentage point growth respectively.
The number of new fintech firms set up across ASEAN dropped to 95 companies in 2023, falling more than 75% from 2022. This aligned with the broader downtrend in the technology sector.
Looking ahead, rapid advancement in artificial intelligence technology is a key emerging space that will propel the next generation of fintech innovations.
© 2024 Institute of Singapore Chartered Accountants