India has displaced China to become the top market in Asia for fintech deals for the first time, according to the Global Fintech Report Q2 2019 released by tech market intelligence platform CB Insights.
India saw 23 deals between venture capital firms and fintech companies in the second quarter of 2019, beating China by eight deals.
Some of the notable Indian fintech deals sealed during the period of study include payments firm RazorPay’s USD 74 million Series C round led by Sequoia Capital India and Ribbit Capital, as well as insurtech company Acko’s USD 65 million Series C round led by Amazon.
Even though India outpaced China as the top fintech market in Asia, the number of deals it closed in the second quarter actually fell from the first quarter. India recorded 29 deals in the first quarter of 2019, six more than the next three-month period.
However, the decline should be taken as a positive sign, as the number of deals in India had been falling since the second quarter of 2018. It only spiked in the first quarter of 2019. This suggests that investment activity in this sector in India is returning to normal.
A KPMG report suggests that the re-election of the incumbent Indian government in May might have played a role in increasing investor and business confidence, and that the outlook for VC funding in India is “very positive.”
Fintech funding activity is expected to continue at a brisk pace, according to Indian business news publication Mint.
India has since seen several notable fintech investments, such as online financing platform Lendingkart’s USD 21 million Series D round in August led by India Quotient, Bertelsmann India Investments, and Fullerton Financial Holdings. Online lending platform Rupeek also raised USD 30 million in a Series B round in the same month.
In comparison, China recorded a five-quarter low of only 15 deals—81% lower than the same period in 2018.
Nonetheless, in terms of deal values, China remains ahead of India. Its total fintech funding in the second quarter of 2019 was USD 375 million, edging over India’s USD 350 million.
The entirety of Asia completed 82 deals worth a total of USD 1.1 billion in the same period, but both numbers are close to historic lows. CB Insights predicts that Asian fintech deals and funding for the entire 2019 will fall short of 2018’s record—the continent recorded 567 fintech deals worth USD 22.8 billion in that year.
KPMG suggests that the relatively quiet fintech investment activity is a reflection of the “significant maturation in China’s payment sector, following two years of ongoing investments and mega deals.”
However, less mature areas within fintech, like microfinance and consumer finance, are growing rapidly, possibly because of saturation in the payments market.
Artificial intelligence, cloud solutions, big data, and blockchain technologies are becoming more popular among tech companies in China, where the fintech scene is expected to rebound when these newer areas gain traction, according to KPMG.