Total funding for FinTech startups in Southeast Asia (SEA) has dropped significantly, hitting the lowest point since 2020. According to a report by Tracxn, funding fell by 74% to $229 million in the third quarter of 2023, compared to $887 million in the same period the previous year. This decline in funding can be attributed to various factors, such as rising interest rates, macroeconomic conditions, and a fear of reduced startup valuations. Additionally, declining global demand for manufactured goods and early onset of El Niño have also impacted the SEA economy.
In terms of the funding breakdown, the report states that early-stage funding in the FinTech sector in SEA reached $203 million in the third quarter of 2023, a 37% decrease from the previous quarter and a decline of 55% compared to the same quarter in 2022. Meanwhile, seed-stage investments amounted to $26.3 million, a decrease of 27% compared to the previous quarter and a 73% decrease from the third quarter of 2022.
The report identifies cryptocurrencies, insurance information technology (IT), and investment tech as the top-funded sectors in the third quarter of 2023. Cryptocurrencies received funding of $71.5 million, while internet-first insurance platforms, payments, and alternative lending were the most affected segments, experiencing a significant decline in funding.
Despite these challenges, Tracxn remains optimistic about the long-term growth of the region’s FinTech sector. Factors such as a young population, a large consumer base, and government initiatives contribute to this optimism. However, the uncertain global macroeconomic situation continues to impact funding opportunities.
In another report focusing on Indonesia, Tracxn reveals that funding for FinTech startups in the country plummeted by 94% in the third quarter of 2023, reaching only $21 million compared to $352 million in the same period in 2022. The absence of late-stage investments contributed to this steep decline. Payments and investment tech were the only sectors that received funding during this quarter in Indonesia, with payments receiving $20 million and investment tech receiving $1 million in funding.
The report notes that investors are exercising caution due to the global macroeconomic slowdown. However, the Indonesian government is making efforts to improve the startup landscape in the country with its own initiatives.