Despite a global downturn in fintech investments, Singapore’s artificial intelligence (AI) funding has surged, highlighting the city-state’s unwavering commitment to innovation in the financial technology sector.

Key Highlights

– Singapore’s AI funding increased by 77% to US$481.21 million in 2023, demonstrating significant confidence in AI’s potential.

– The city’s crypto, payment, and insurtech sectors showcased remarkable resilience amidst market fluctuations, adapting investor strategies accordingly.

– Global fintech funding halved from US$196.6 billion (7,515 deals) in 2022 to US$113.7 billion (4,547 deals) in 2023, mirroring a 68% decline in Singapore’s fintech investments.

– Despite these challenges, Singapore secured 21% of Asia Pacific’s fintech deals, reinforcing its regional prominence.

– The Americas dominated global fintech funding in 2023, attracting nearly 70% of total investments (US$78.3 billion), underscoring its sustained significance.

In a year marked by volatility in global fintech investments, Singapore’s funding for artificial intelligence (AI) technologies has experienced an extraordinary surge. According to the KPMG Pulse of Fintech H2’23 report, AI fintech funding in Singapore skyrocketed to an impressive US$333.13 million in the second half of 2023, representing a remarkable 77% increase from US$148.08 million in the first half. This culminated in a total AI sector investment of US$481.21 million across 24 deals in 2023. Companies are rapidly innovating, launching AI-driven products to secure a competitive advantage.

While the global fintech investment in AI saw a downturn—from US$28.1 billion in 2022 to only US$12.1 billion in 2023—the decline does not indicate a lack of interest. Many financial institutions and fintech firms have opted to harness AI through strategic alliances and product expenditures rather than direct investments throughout 2023.

 A Broader Perspective on Fintech Investment

On a wider scale, Singapore’s fintech sector garnered a total funding of US$2.20 billion, encompassing mergers & acquisitions (M&A), private equity (PE), and venture capital (VC) deals in 2023. This represents a 68% decrease from the US$4.4 billion raised in 2022. The deal activity also halved, decreasing from 189 in 2022 to 94 in 2023, particularly reflecting a sharp decline in the second half of the year. Funding plummeted by 64%, from US$1,455 million across 102 deals to US$747 million across 87 deals.

“The fintech market floundered somewhat in 2023, buffeted by many of the same issues challenging the broader investment climate. While there were still good deals to be had, investors were definitely sharpening their pencils—enhancing their focus on profitability,” noted Anton Ruddenklau, Global Head of Fintech and Innovation, Financial Services, KPMG International. “While it was a depressed year for the fintech market overall, there were a few particularly bright lights. Proptech, ESG fintech, and investors embraced AI-focused fintechs—which helped particularly in the last six months.”

This represents the slowest performance for fintech funding since 2020, when only US$1.13 billion was raised across 183 deals. The decline in investor sentiment is primarily attributable to geopolitical tensions, a high-interest rate environment, and a lackluster exit climate. These factors compelled fintech investors to exercise caution and conserve cash reserves throughout 2023.

 Singapore’s Fintech Resilience

Despite the overall downturn, Singapore has emerged as a leader in the Asia Pacific region, capturing 21% of all fintech deals in the area. The year 2023 witnessed significant fintech transactions, with a US$359 million venture capital deal involving digital bank AnextBank leading the charge, closely followed by insurtech firm Bolttech, which secured US$246 million in funding.

The resilience of Singapore’s fintech sector during challenging times is commendable. Investors have pivoted towards early-stage companies, resulting in 74 deals, and seed funding led to 63 deals. These transactions predominantly contributed to smaller deal sizes, reflecting a strategic approach by investors to diversify risk while exploring various next-wave fintech business models.

 Global Fintech Trends and Noteworthy Deals

The global fintech market grappled with significant hurdles in 2023, with total investment dwindling to a six-year low of US$113.7 billion across 4,547 deals, down from US$196.6 billion in 2022. However, the second half of the year exhibited slight resilience, with a marginal uptick from US$55.5 billion in H1’23 to US$58.2 billion in H2’23, bolstered by six noteworthy deals exceeding US$1 billion each.

Regionally, the Americas dominated the fintech funding landscape in 2023, accounting for nearly 70% of total investment (US$78.3 billion across 2,136 deals). The United States alone accounted for US$73.5 billion of this total, while the EMEA region attracted US$24.5 billion and the ASPAC region garnered US$10.8 billion.

While challenges persist, the strategic investments and adaptive approaches within Singapore’s fintech landscape reveal a promising future. The enduring interest in AI, coupled with resilient sectors like payments and insurtech, positions Singapore as a formidable player in the global fintech arena. As the market evolves, the potential for innovation and growth remains palpable, setting the stage for an exciting year ahead in 2024.