Venture capital investments into the fintech space in Southeast Asia hit the lowest in 2023 compared to the last five years, according to a Tracxn report.

Fintech companies in the region raised just US$2 billion in 2023, a plunge of 65 per cent from US$5.9 billion in 2022. The space saw the highest funding (US$8.6 billion) in 2021.

The number of deals fell 50 per cent in 2023 — just 142 in 2023 compared to 288 in 2022, revealed the Tracxn Geo Annual Report: SEA FinTech 2023.

Also Read: With just US$108M raised, December was the least funded month in 2023: Tracxn

In 2023, seed-stage investments declined 68 per cent to US$166 million from US$522 million in 2022. Early-stage funding plunged to US$836 million from US$2.6 billion in 2022. Late-stage funding also saw a 64 per cent drop to US$1 billion.

With US$689 million raised, Q4 was the highest funded quarter of the year, while Q3 was the lowest (US$282 million).

A downward trend was observed in the US$100 million+ rounds in 2023 to just six in 2023 from 16 in 2022. Kredivo, Investree, and Gojek were some of the companies that reported US$100 million+ rounds. No new unicorns emerged during the year, similar to 2022.

The number of acquisitions also fell to 19, a sharp contrast from 27 in 2022 and slightly higher than 17 in 2021. Further, only two regional fintech companies went public in the past three years, with one IPO each in 2023 and 2022.

The highest funding was observed in the alternative lending, payments and insurtech segments. The alternative lending space attracted US$700 million in 2023 — an 11 per cent growth over 2022. Insurtech investments stood at US$256 million in 2023, a sharp spike of 105 per cent compared with US$125 million raised in 2022.

In contrast, the payments saw an 87 per cent plummet over the previous year, securing just US$270 million in 2023.

Singapore dominated the fintech funding space by securing US$1.1 billion in the past year.

East Ventures, YCombinator, and 500 Global were the most active investors to date in the SEA fintech sector.

Antler, Saison Capital, and Tenity were the top seed-stage investors, while Gobi Partners, Peak XV Partners, and Openspace Ventures were the most active early-stage investors in 2023. EDBI, Prosperity7 Ventures and 01Fintech were the top late-stage investors in 2023.

How Indonesian fintechs fared in 2023

Indonesia, the second-largest economy and the second-highest-funded startup ecosystem in the region, witnessed a 51 per cent decline in fintech funding in 2023 to US$765 million.

Seed-stage funding saw a significant plunge (84 per cent) to US$9.5 million in 2023. Early-stage investments fell 79 per cent to $99.4 million, while late-stage financing saw a 40 drop to US$656 million.

Also Read: Startup funding in SEA falls 65% to US$4.3B in 2023: Tracxn

Alternative lending, payments, and banking tech were the top-performing segments.

The sector witnessed four acquisitions in 2023, similar to 2022.

500 Global, Hustle Fund, and Mandiri Capital Indonesia were the top investors in the seed stage in 2023, while Gobi Partners, Alpha Trio, and Openspace Ventures were the most active early-stage investors.

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The adoption of digital transformation in Banking, Financial Services and Insurance (BFSI) has increased over time and has been further accelerated after the pandemic. This led to increased utilisation of digital wallets, fintech application adoption and point-of-sale terminals — allowing new financial lifestyles.

For example, annual fintech app installs in Asia have already grown by 32 per cent from 2022 to 2023. This is twice higher than the global annual install average growth of 14 per cent. In APAC, Thailand, in particular, has been at the forefront of digitalisation with a 95 per cent growth in BFSI applications year on year.

The region’s growing demand for mobile banking solutions further fuels this digital revolution, opening new avenues for global expansion and the enhancement of services. Overall, the digital transformation has reshaped the BFSI sector by modernising operations, enhancing productivity, and providing solutions that enable banking in the new normal.

However, the rise of digital banking is creating new online security challenges, with cyberattacks on financial institutions around the world growing exponentially. According to the IBM Security X-Force Threat Intelligence Index of 2022, Asia was the most attacked region in 2021, accounting for 26 per cent of all attacks. To delve deeper, 70 per cent of these attacks targeted banks. The number of critical vulnerabilities (CVEs) is also increasing by 13 per cent per month this year, as per a report by Coalition.

Furthermore, with the increase in the adoption of Data Protection regulations in the region, companies must ensure they comply with such laws, adding one more layer of complexity to their operational landscape.

In Singapore, for example, organisations that are handling payment data must ensure compliance with both the PDPA and PCI DSS to adequately protect personal and financial information. Without PCI DSS compliance, they are unable to ensure a secure environment for enterprises that accept, process, store, or transmit credit card information.

Also Read: The business edge: Why prioritising employee cybersecurity is a smart investment

Protecting sensitive financial data and ensuring cyber resilience must be at the forefront of every strategy. In order to do so, organisations must understand the BFSI threat landscape and make sure they have a holistic cybersecurity approach.

Understanding BFSI’s threat landscape

The BFSI sector faces a multifaceted threat landscape, with API attacks being one of the prominent concerns. These attacks have the potential to disrupt online services, leading to significant financial losses and irreparable damage to an institution’s reputation.

Unsecured APIs within the BFSI sector pose a grave risk as they can expose sensitive customer data to theft and manipulation, potentially resulting in severe regulatory penalties and a loss of customer trust. In fact, Gartner has predicted that by 2025, 50 per cent of data theft will be attributed to unsecured APIs.

Additionally, the rise of malicious bots has further complicated the threat landscape for BFSI companies. These bots account for over 50 per cent of all internet traffic and are constantly scanning BFSI applications and APIs for security misconfigurations and vulnerabilities.

Within the realm of API attacks, the BFSI sector faces several specific types of threats, including:

• Unauthorised access: Attackers leverage stolen login credentials to gain unauthorised access to user accounts through APIs.
• Security misconfiguration: Attackers exploit API misconfigurations and other vulnerabilities to gain access to sensitive data, potentially leading to data breaches.
• Application DDoS: Attackers flood APIs with an overwhelming number of requests, causing system crashes or slow response times and disrupting online services.
• Man-in-the-middle (MITM) attack: Attackers intercept data transmitted between API endpoints, enabling them to steal sensitive information, posing a significant risk to data integrity and confidentiality.

Handling cybersecurity threats: A holistic approach

To mitigate the risk of cyberattacks on BFSI applications and infrastructure, enterprises need to implement the following best practices encompassing people, processes, and technology.

• Advanced threat detection: Advanced threat detection mechanisms can identify abnormal patterns of behaviour within web applications. Machine learning and AI-driven solutions can help BFSI entities stay one step ahead of cybercriminals.
• Security assessments: Regular security assessments and penetration testing are essential to identify vulnerabilities within web applications. A proactive approach to testing and patching vulnerabilities to prevent exploitation is required.

Also Read: The state of cybersecurity in 2023: How APAC organisations can stay ahead of the curve

• Secure coding practices: Ensuring that web applications are developed with secure coding practices in mind is crucial. This approach involves input validation, output encoding, and parameterised queries to prevent common vulnerabilities like SQL injection and cross-site scripting (XSS).
• Encryption: The significance of encryption in securing data both in transit and at rest cannot be more important. The use of secure protocols like HTTPS and SSL/TLS can prevent data breaches.
• API security: APIs are the lifeblood of modern BFSI applications, so discovering and securing API endpoints against malicious requests is a critical threat plane that should not be overlooked.
• DDoS protection: The high availability and performance requirements of BFSI applications require scalable protection against DDoS attacks, which are increasing in complexity and size each year.
• Bot management: Bot Management solutions help separate benign bots (e.g., search engine bots) from malicious bots (e.g., those attempting Account Takeover attacks), better protecting BFSI customers and greatly reducing unwanted traffic on critical applications and APIs.

With a global shortage of security professionals, most organisations can benefit from dedicated experts who not only set up the latest security solutions but maintain them and offer support teams during attacks. Managed security operations, including 24×7 SOC, deploying cutting-edge technologies, the latest threat intelligence and custom runbooks to enhance overall security posture.

In conclusion, opting for a holistic Web Application and API Protection (WAAP) solution offers a robust defence against the prevalent and high-priority challenges currently encountered by BFSI institutions.

Furthermore, the adoption of a unified WAAP not only bolsters multiple compliance requirements, such as PCI DSS 6.6 and similar standards, but also streamlines security point solutions – leading to cost reduction, enhanced security, and fortified enterprise security posture. These measures collectively constitute a holistic approach to cybersecurity, addressing the multifaceted challenges that BFSI institutions face in the digital age.

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FlyORO, a provider of last-mile sustainable aviation fuels (SAF) blending technologies, has closed a pre-Series A round, securing US$1.6 million.

Hong Kong-based Audacy Ventures led the round, with participation from Asia Pacific-based VC firm Investible and unnamed private investors.

Singapore-based FlyORO will use the money to accelerate its ongoing projects and international expansion. The initial focus will be on strategic initiatives in Australia and the US.

Also Read: FlyORO wants to decarbonise aviation with its last-mile sustainable fuel blending tech

The Australian market is gaining momentum in the development of SAF, leveraging its abundant feedstock resources and skilled workforce. The country’s optimistic outlook includes establishing a local SAF production facility to supply carriers within the region.

With favourable legislation, the US fosters innovative developments across various SAF technological pathways. With the highest number of airport distributions and private aircraft ownership globally, FlyORO aims to initiate early developments in the US in 2024.

Founded by Jonathan Yeo, Joe Ng, and Genevieve Toh, FlyORO provides a modular, on-demand blending service of SAF and jet fuel to enable aviation on its emissions reduction journey. It enables flyers the flexibility to align their ESG targets per flight. With a small form factor of 40ft, it is space-efficient and portable and can be installed anywhere at or off the airport base. This solution allows airport fuel operators to serve flyers more effectively with a simplified supply chain.

Following the launch of FlyORO’s modular SAF blending technology AlphaLite, in collaboration with Jet Aviation in April 2023, FlyORO aims to reduce aviation emissions globally. AlphaLite offers flexibility and control to flyers. AlphaLite empowers aircraft operators to make better-informed decisions regarding SAF adoption, considering factors from cost parity to feedstock quality.

Also Read: The Capture app enables you to track, reduce and offset carbon emissions from everyday life

SAF is estimated to contribute 65 per cent of aviation’s emissions reduction goal, equivalent to approximately 450 billion litres of SAF adoption annually by 2050.

“2023 has been a pivotal year for us. We launched with Jet Aviation as our SAF partner for our Singapore market in April. In just seven months, we are going beyond our borders, much earlier than we expected,” said FlyORO CEO Jonathan Yeo.

FlyORO plans to commence the next financing round in the second half of 2024.

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2023 was a tough year for early-stage founders and VC funds around the globe, and HK is no exception. HK has been in an even trickier position than other cities, given its highly outward-facing economy and connectivity with China, when the sentiment of global investment in China turned so sharply after the huge bull runs in the country for the past 20+ years.

While the fundamentals of HK have shaken and shifted, 2023 was a year where much of the foundational work of building an innovation scene was done. Here are my two cents on what to expect in Hong Kong for 2024 in the early-stage startup scene, organised by opportunities and challenges:

Opportunities

RAISe+ Scheme: First batch of university startups carrying unique IPs to be unveiled

An HK government-led program with an allocation of HK$10 (US$1.28) billion, the RAISe+ scheme will, on a matching basis, fund 100 high-potential research teams in 8 universities. Each team can get up to HK$100 (US$12.84) million in non-dilutive funding.

From the $ sign — this is the biggest funding scheme available for university-originated startups in HK. The scheme was a core focus for many knowledge transfer offices in HK universities in 2023, where professors and their fellow researchers/project leads were busy writing proposals while university staff jiggled with all the letters of intent from investors/industry partners and requirements set forth by ITC. The first batch is expected to be announced within Q1 2024 after screening.

We met some of these projects with interesting underlying IPs. How the universities, professors, project leads, and investors handle the rest of the difficult parts of starting a venture – hiring, fundraising, productisation, fundraising, and more — would be the next set of questions to be answered.

HK remains the go-to hub for GBA startups going global

We spent quite some time in 2023 meeting China-based early-stage startups related to advanced manufacturing (semiconductor, new material, ESG material), industry 4.0 (robotics, automation, innovations in traditional industries), and cross-border e-commerce.

Also Read: How AI will shape the future: A look ahead to 2024 and beyond

Chinese founders shared their firsthand experience facing the lowered spending power of local corporations and consumers. As a result, many of them have taken their products abroad, selling at a higher price point than what they could ask for in China. Over time, China has built up top-of-class manufacturing and operating know-how and trained skilled labour that is unreplaceable by other geographies (read: Will China Continue to Grow? by Weijian Shan).

China startups that possess unique R&D and manufacturing know-how and operate in non-sensitive industries will still utilise Hong Kong as the hub for initial funding and landing their first batch of overseas customers.

Lots of dry powder waiting to deploy in HK

In 2023, local and global GPs secured fresh funding to be deployed specifically to companies with a HK nexus, thanks to the setup of the Hong Kong Growth Portfolio. Last year, many of them were setting up their team and understanding the ecosystem in HK. On the other side, CVCs and universities are increasingly active in either direct investment or fund investment in HK as well. There is pressure to deploy for these investors, which should help to drive more deal activity in 2024 in HK.

Having said all this, the HK startup ecosystem is faced with some fundamental challenges:

Challenges

Opex: Cost of operating and funding gap between Seed → B

While GPs are loaded with cash, there is a lack of startups with a valuation range of US$200 million – $500 million that can digest a round of US$20 million – US$100 million in HK. On the other side, there has been a funding gap that remains unfilled for startups looking for Series A/+ lead investors.

Rent and labour costs continue to be the two biggest headaches for HK-based startups – needs no further elaboration.

Also Read: The quiet giants of 2024: Celebrating the success of ‘boring’ businesses

Talent: Lack of startup operators and operator-turn-founders

While there has been strong growth in the number of startups in HK over the past decade, the ecosystem of operators who are willing to take the risk and be the first employees of a fresh HK startup is still nascent. We are still building the flywheel where early employees of successful startups become founders or operators for another early-stage venture. Not to mention the challenge of the tech brain drain in the city since 2020.

Exit pathway: Billion-dollar question for both VCs and startups

With many corporates cutting their spending, the incentive for larger players to acquire startups has decreased, especially when M&A activity has already been low in the region. Coupled with a stagnant IPO market, HK startups are faced with an even tougher market compared to other comparable startups in other regions.

What are your thoughts about the startup scene in 2024?

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Semaai, a ‘farmer-first’ company building full-stack agritech solutions, has just announced a US$4.7 million investment round led by CyberAgent Capital to propel the expansion of its embedded fintech solutions and agronomy advisory services in Indonesia. The company aims to enhance the user experience in its marketplace by integrating with additional financial institutions. It plans to cover 75 per cent of over 8,200 Indonesian villages by 2024.

In an interview with e27, Semaai Co-Founder and CEO Muhammad Yoga Anindito delves into Semaai’s integrated digital ecosystem, strategies for growth in Central Java, and the pivotal role of technology in supporting agri-retailers and smallholder farmers.

Edited excerpts:

Can you share more details about how this funding will specifically contribute to expanding Semaai’s embedded fintech solutions and agronomy advisory services?

The funds will be utilised to enhance the integrated fintech experience within our marketplace, aiming for a more seamless user experience. Additionally, we plan to broaden our offerings by integrating with additional financial institutions and fintech players.

Also Read: Semaai nets US$4.7M to expand its agritech, fintech solutions to Central Java

Semaai aims to cover 75 per cent of over 8,200 villages in Indonesia by the end of 2024. How do you plan to achieve this ambitious goal, and what impact do you anticipate on the local agricultural communities?

Our mission is to empower the local communities, and our success depends on addressing their needs. Our full-stack agritech solution has enhanced access to crop nutrition through the input marketplace and increased knowledge about the latest agri-input products through advisory services. But this is just the beginning, and we believe technology can add value to these communities in multiple ways.

Could you elaborate on how Semaai’s digital marketplace for agricultural inputs, agronomy advisory services, and financial solutions collectively form an integrated digital ecosystem? How does this address disruptions in the supply chain and support agri-retailers and smallholder farmers?

When combined, these services can help retailers and smallholder farmers make smarter, more well-informed decisions and implement more sustainable farming practices. Never before had farmers and retailers had better access to pricing and knowledge transparency, thanks to the efficiency and speed that we bring to the supply chain.

You plan to focus on strengthening Semaai’s presence in Central Java. What factors led to the decision to prioritise this region, and how do you see it contributing to the overall growth and impact of Semaai’s services?

Central Java has a sizable agricultural sector and farmer population. Strengthening our foundation in this province could serve as a blueprint to make our expansion outside the province easier.

Semaai claims a significant increase in net revenue, Toko Tani marketplace user base, and advisory feature adoption. What key strategies or initiatives do you attribute to this remarkable growth in the past 12 months?

Margin expansion came naturally as we grew in transaction volume, and our state-of-the-art logistics tech has proven to be a major leverage for us to go one step closer towards profitability.

This efficient logistics system contributed to margin expansion and enhanced the overall user experience, attracting more users to our marketplace.

As a ‘farmer-first’ company, how does Semaai ensure that its agri-tech solutions are tailored to the specific needs and challenges farmers and rural MSMEs in Indonesia face?

We have a specific bottom-up approach to business development. Every decision we make, every feature we plan to build, and every policy we enforce has to go through a rigorous proof-of-concept process from the field. Having a system to accommodate this process and living it as part of our culture is the key to maintaining our swift development as a customer-first company.

With the expansion of financial services in collaboration with institutions and fintech providers, how does Semaai plan to address the unique financial needs of agri-retailers and farmers? What role does technology play in enhancing financial inclusivity in the agriculture sector?

The unique integration of fintech institutions with our know-how of the input market, coupled with the data collected through a marketplace, uniquely positions us to develop tailored solutions for key stakeholders.

Also Read: Semaai nets funding to create integrated digital ecosystem for farmers, toko tanis in Indonesia

Can you provide insights into the partnerships with financial institutions and fintech providers? How do these collaborations enhance Semaai’s ability to provide comprehensive financial solutions to its users?

We have multiple integrations and conversations underway for digital financial services. We are exploring everything from supply chain financing to insurance to farmer lending. Watch this space for more.

The agronomy advisory service plays a crucial role in Semaai’s ecosystem. How is educational content organised, and how do you ensure that farmers can access relevant information to improve their farming practices?

Currently, the agronomy service is focused on pests and disease detection, and the educational content on the marketplace app is organised around that. With the raise, we are exploring digital tools to help farmers adopt better practices.

Looking ahead, what are the key milestones and plans for Semaai, both in terms of geographical expansion and the enhancement of your agri-tech solutions? How do you envision Semaai’s role in shaping the future of Indonesia’s agricultural landscape?

Our vision is to be the digital platform of choice for Indonesian agriculture, and we can only achieve this by addressing the different needs of our customers. Our priority is to advance our solution stack further to better cater to the needs of our customers, and we are confident we can easily expand this enhanced offering to the rest of Indonesia.

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