THE total funding to fintech startups in South-east Asia plunged by 74 per cent to US$229 million in the third quarter, from US$887 million in the third quarter of last year.

It is the lowest funding level since 2020, following a steady decline from its peak in Q4 of 2021, according to a report by data intelligence platform Tracxn released on Friday (Oct 6).

No new unicorns emerged from the sector in Q3, similar to the previous quarter and the corresponding quarter last year, and no funding round exceeded US$100 million in the quarter.

The significant drop in funding was mainly attributed to the absence of late-stage rounds in the quarter; this segment raised US$338 million in Q3 last year.

Weaknesses in the region’s investment market mirror the global trend, with multiple environmental factors – rising interest rates, falling demand for manufactured goods, the early onset of El Nino – weighing on investor sentiment.

On the year, early-stage rounds registered a 55-per cent drop in funding to US$203 million. Seed-stage funding tumbled 73 per cent to US$26.3 million from US$98 million raised in the year-ago period.

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There were no initial public offerings in the sector in Q3, but six acquisitions took place, up marginally from the five in Q3 last year.

Despite a faltering regional market, Singapore leads in fintech funding in South-east Asia, followed by Jakarta and Bangkok.

From a sectoral perspective, cryptocurrencies, insurance IT and investment tech were the top-funded fintech areas in Q3.

East Ventures, Y Combinator and 500 Global were the most active investors in this space.

In seed-stage rounds, Y Combinator, Hashed and Binance Labs were the top investors, while Patamar Capital, Lightspeed Venture Partners and Peak XV Partners were the most active in early-stage rounds.

Despite a challenging macro environment, Tracxn is confident in the region’s long-term growth, given its young population, large consumer base, dependency on informal financial and commercial systems, as well as governmental initiatives.