Soaring interest in cryptocurrencies and blockchain, along with large deals in the buy now, pay later (BNPL) space, helped drive a record volume of 5,684 global fintech deals worth US$210 billion (SG$282.32) in 2021, according to the latest KPMG Pulse of Fintech report.

Global fintech investment climbed from $US124.9 billion in 2020, almost reaching 2019 levels of US$213.8 billion.

According to KPMG’s Pulse of Fintech H2’21 report, released in February, Singapore’s fintech industry posted a five-year high of 191 deals transacted in 2021, up from 139 deals in 2020 and 100 in 2019.

Total transaction value of Singapore deals climbed 59 per cent year-on-year to US$3.94 billion in 2021, up from US$2.48 billion in 2020. The city-state saw record levels of investment in crypto and blockchain with US$1.48 billion transacted across 82 deals in 2021, up from US$109.75 million over 26 deals in 2020.

Of the US$210 billion global total in 2021, venture capital investment rose to a record US$115 billion, M&A activity accounted for US$83 billion, and private equity funding US$12.2 billion. Crypto and blockchain attracted US$30 billion in investment globally, up from US$5.4 billion in 2020.

Robust BNPL investment across regions included Swedish-based Klarna’s US$1.2 billion venture capital raising, PayPal’s acquisition of Japan-based Paidy for US$2.7 billion, and Block’s US$29 billion deal to buy Australia-based Afterpay which was completed last month.

There was a record number of deals in every major region, including a record 1,165 deals worth US$27.5 billion in the Asia-Pacific. That bounced back from US$14.7 billion in 2020, but was still below the US$36.9 billion invested in Asia-Pacific fintechs in 2018.

Anton Ruddenklau, global fintech leader at KPMG International in Singapore, said global investors are starting to recognise the enormous size and scale of the Asia-Pacific fintech market.

“This is going to drive a lot of activity heading into 2022 as both investors and companies look to gain a share of the action in the region,” he said.

“Singapore and India could be big winners on the investment front as investors and companies that might have gone to China look for opportunities elsewhere in the region.”

China’s moves to tighten fintech regulations and completely ban crypto mining in 2021 helped raise the profile of other fintech hubs and drive market attention elsewhere in the Asia-Pacific.

KPMG said regulators in numerous jurisdictions increased their focus on regtech solutions during the year, with the Monetary Authority of Singapore (MAS) particularly active.

MAS launched initiatives to strengthen the artificial intelligence (AI) abilities of Singapore’s financial services sector, including technical platform NovA!, which helps institutions assess environmental risks of companies, and AI-governance program Veritas, which helps financial service providers use AI and data analytics.

Looking ahead, KPMG said the outlook for global fintech investment remains very strong in 2022.

Ruddenklau said cryptocurrencies and blockchain are expected to continue to be very hot areas of investment, with crypto firms looking to regulators for clear guidance to help foster growth in the blockchain technology space.

“In Singapore, the surge in investments into crypto and blockchain [has] also outpaced that of payments which long held the top spot here,” he said.

“Given how many banks are beginning to see the major limitations inherent in their legacy architecture and technologies, we are also expecting a surge in investment into banking replacements able to help them rethink core banking services.”

Among the trends to watch, KPMG said Singapore was increasingly on the radar of companies looking for a base from which to expand outside of the Asia-Pacific. It also forecast growing Asia-Pacific investment into developing regions such as the Middle East and Africa, and continued interest in embedded finance as banks look to improve their digital offerings and supply chain finance capabilities.

In addition, fintechs in the region will be looking to emphasise their data value proposition in order to attract more investment.

“Over the last year, there’s been a growing trend among scaling fintechs across the Asia-Pacific region to reinvent themselves as data organizations in order to attract more attention and investment — billing themselves as data providers that offer payments, lending, insurance, or other related activities rather than simply fintech companies,” KPMG said.