Crowning Asia’s fintech hub: India, China continued to fight it out; here’s the winner

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Published: November 21, 2019 7:45:37 PM

For the past few years, Chinese startup ecosystem remained the apple of investors’ eyes, pouring millions of dollars and making it the hottest and probably the most insane investment activity in the recent history of global VC funding.

With respect to deal volume or number of deals in Asia’s fintech ecosystem, China bounced back strongly in Q3 2019. Image source: CB Insights Global Fintech Report Q3 2019

India for the first time edged out China, though narrowly, in quarterly fintech deals in Asia to become the fintech hub of the region in Q3 2019. Indian fintech companies attracted $674 million during the period while China’s got stuck at $661 million, according to CB Insights Fintech report for the quarter. While the deal value has certainly grown decently for India from $398 million in Q3 2018 and $352 million in Q2 2019, it is actually due to the pullback in China, as the amount went in free fall from a massive $1.8 billion in Q4 2018 to just $337 million in Q1 2019, that has helped India turn competitive. “China also saw funding grow to $661M, but nowhere near 2018’s funding highs,” said CB Insights.

For the past few years, Chinese startup ecosystem remained the apple of investors’ eyes, pouring millions of dollars and making it the hottest and probably the most insane investment activity in the recent history of global VC funding. However, it started plummeting in almost the last 12 months, as according to KPMG Venture Pulse Q2 2019 report funding in China declined, from around $45 billion in Q2 2018 to around $6 billion in Q2 2019.

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“While economic growth overall in China and Hong Kong remains robust, these trends suggest that US/China trade tensions are having some impact on market confidence,” Irene Chu, Partner, Head of New Economy and Life Sciences, Hong Kong region, KPMG China said. Infact, as the China-US trade dispute continues, China’s VC funding space may remain sluggish. While China’s loss may or may not be India’s gain but the re-elected Modi government has helped VC sentiments to stay afloat. “They (VC community) know that the economic policies and programs created and administered by the ruling party before the election are likely to continue through to the next election in five or so years’ time,” said Nitish Poddar Partner and National Leader, Private Equity KPMG in India.

With respect to deal volume or number of deals in Asia’s fintech ecosystem, China bounced back strongly in Q3 2019 after a dull Q2 2019 even as China remained dominant throughout the past 12 months. India’s fintech deal volume in Q2 2019 stood at 23  while China’s was at 21. It grew to 55 in Q3 2019 while India’s deal volume increased only to 33. Overall $1.8 billion were invested in 152 fintech deals across Asia in the last quarter while so far in 2019 $4.1 billion were invested in 395 deals. In 2018, the amount was $22.9 billion across 593 deals. Nonetheless, “Asia funding may fall to a four-year low if the pullback in China continues or if India deals cool down,” said CB Insights.

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