Fintech sparkles amid SEA’s tech winter

In The Top Up this week, we look at the fintech players that raised the most funding in 2023 and Shopee’s acquisition of Blu’s credit arm. [Read from your browser]( The Top Up 💵 Welcome to The Top Up! Delivered every fortnight via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If you’re not a subscriber, get access by [registering here]( IN FOCUS In today's newsletter, we look at: - [How fintech emerged as Southeast Asia’s top sector for funding in 2023]( - What Shopee’s acquisition of a Brazilian fintech startup’s credit unit says about where its future lies --------------------------------------------------------------- Hello {NAME} Happy New Year! 2024 looks to be an exciting year. With our acquisition by SPH Media, we have much to look forward to over here at Tech in Asia. I decided to join Tech in Asia full-time after freelancing with the organization for over a year. This gave me a good sense of the nature of the work and the people I would be dealing with, de-risking the decision considerably. This decision-making process sprang to mind when I read that Sumitomo Life planned to fully acquire Singlife. The Japanese firm said it would buy up TPG’s 35% stake and offer to do the same for Singlife’s other shareholders. Sumitomo has been an investor in Singlife since 2019, and the past few years would have given it the opportunity to familiarize itself with the latter’s business model, management, and prospects. The deal, which values Singlife at US$3.5 billion, was one of the biggest among Southeast Asian tech firms in 2023. The year saw fintech emerge, yet again, as the top draw for investors in the region’s tech ecosystem. In this week’s Big Story, I take a closer look at which sub-sectors - and specific players - within the fintech industry attracted the most funding. With the total dollar value of investments made in Southeast Asia on an uptick, one investor is keeping an eye on areas like medtech and agritech, sectors that “governments see value in.” Digital banks Anext, MariBank, and GXS alone raised over half a billion dollars in total from their parent firms, which include major tech platforms like Ant Financial, Sea, and Grab. Meanwhile, Sea’s acquisition of the credit arm of a Brazilian fintech player is the subject of this week’s Hot Take. Given the renewed competition Shopee is facing in Southeast Asia, the performance of Sea’s digital financial services arm will be even more crucial to its beleaguered share price. -- Simon  --------------------------------------------------------------- THE BIG STORY [Fintech and ecommerce lead the way in SEA’s turbulent tech year]( In the second half of 2023, the value of deals was 87% higher than in the first six months of the year, Tech in Asia data shows.  --------------------------------------------------------------- THE HOT TAKE Might credit be Shopee’s key to survival? Here’s what happened: - Last month, Shopee won [preliminary approval]( from Brazil’s antitrust regulator to buy the local credit arm of fintech startup Blu. - The deal has not been announced by the companies. - The acquisition, if approved, paves the way for Shopee to offer credit directly to customers in Latin America’s largest economy. Here’s our take: Sea Group and its ecommerce arm Shopee have been [labeled]( as the losers of the pair-up between TikTok and GoTo in Indonesia. “Shopee will not be able to beat TikTok Shop head on,” Momentum Works founder and CEO Jianggan Li wrote in his analysis of the deal. “The key to winning might not be in ecommerce.” Li makes a bold assumption. Shopee’s acquisition of Blu’s credit arm in Brazil, however, could be a sign of where the Singapore-based ecommerce platform might be headed. At the moment, Sea’s digital financial services business is still small. In the [third quarter of 2023]( SeaMoney accounted for only 13% of the group’s overall revenue. Yet, it is growing quickly. In the same period last year, SeaMoney made up just 10% of Sea’s overall business. The unit’s revenue is also up 36% year on year. More importantly, SeaMoney is more profitable than Shopee. The fintech unit’s [adjusted EBITDA]( margin for Q3 2023 was 37%. This compares to the 10% margin that Shopee enjoyed when it posted its peak profitability in Q1 2023. The ecommerce arm is now back in the red as it has upped its expenses to address the challenge posed by TikTok Shop in Southeast Asia. [See also: Why Sea’s shares plunged while GoTo avoided the carnage]( Lending to underserved individuals and businesses in emerging markets is big business. Other ecommerce firms have demonstrated the size of this opportunity. In Latin America, marketplace MercadoLibre has grown its lending business considerably. In Q3 2018, MercadoLibre had a loan book of [US$91 million](. This has since expanded to [US$2.3 billion]( in Q3 2023 as it offered larger and longer loans to certain users in Brazil and other Latin American countries, with [net interest margins, after losses, of 37%](. Of course, Shopee faces a sea of competition. Many other tech companies also offer lending services, including Grab and GoTo, to say nothing of the fintech firms, digital banks, and traditional banks that are upping their game. However, this is where the link between Sea’s ecommerce and fintech arms may make the difference. The group already has direct relationships with potential borrowers - millions of sellers on Shopee - and has proprietary data that it can use to make lending decisions. This is also an argument for why Shopee has to keep competing in the ecommerce space - in order to build a moat in lending, it has to keep attracting customers and merchants to its platform, even if it ends up losing its dominant position.  --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Revfin gets $14m from Omidyar Network, others to bolster EV loans for Indians]( Founded in 2018, Revfin offers loans for two-wheel and three-wheel electric vehicles, as well as for ancillaries like batteries and EV conversion kits. 2️⃣ [Paytm slashes 1,000 jobs after exiting lending, BNPL sectors]( The layoffs could affect at least 10% of the Indian fintech firm’s total workforce. 3️⃣ [Japan’s Sumitomo Life to fully acquire Singlife, tightening grip on SEA]( As part of the deal, Sumitomo Life will purchase TPG’s 35% stake in the Singapore-based insurance company by the first quarter of the year. 4️⃣ [Home Credit Indonesia secures $100m from MUFG]( The consumer finance firm said that it will “fully use” the funds for ESG-based financing. 5️⃣ [Aspire grows revenue over 2x in FY 2022, loss widens 123%]( The bulk of the Singapore-based fintech company’s expenses for the year went to employee benefits, which grew 173% compared to 2021.  --------------------------------------------------------------- FYI [‘A fiction’: the fall of a fintech star accused of ‘massive fraud’]( An investigation by the US SEC found “billions of dollars of fictitious transactions” at Lagos-based Tingo Group. --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preferences center. In the meantime, if you have any feedback or ideas, feel free to get in touch with Terence, our editor-in-chief, at terence@techinasia.com. See you in a fortnight! P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](  Copyright © 2024 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894