With consumers embracing financial technologies, digital payments firms are fast disrupting the hegemony of traditional players in the payment value chain globally, a trend which is more prevalent in Asia-Pacific (APAC) markets such as China and India. Against this backdrop, payment segment is emerging as a lucrative investment avenue for venture capitalists (VCs), according to GlobalData, a leading data and analytics company.
According to GlobalData, the number of VC deals in banking & payments (B&P) industry globally grew from 461 in Q4 2020 to 620 in Q1 2021, much higher than the previous three quarters. Payments remain popular, with online payments driving five of the top 10 VC deals during the quarter.
Ravi Sharma, Banking & Payments Lead Analyst at GlobalData, comments: “The COVID-19 pandemic has hastened the migration from offline to online from several years to mere months. The disruption has increased demand for a simple, secure, and reliable digital payments solutions, benefiting online payment service providers, encouraging venture capitalists to invest in these companies.”
Rising demand for digital financial services during the COVID-19 pandemic can be seen in Asian markets as the use of banking apps and digital payments grew in the region. Investors are therefore eyeing a pie of this growing market.
For instance, Singapore-based Grab Financial Group, which provides financial services such as payments, lending and insurance received US$300m in Series A funding in January 2021. In March 2021, India-based offline-to-online (O2O) commerce platform DotPe has raised US$27.5m in Series A funding, the first O2O company in India to receive such a substantial amount within a year of launch.
Mr Sharma concludes: “COVID-19 has changed the way consumers shop significantly in Asian markets. Consumers now increasingly prefer digital payment, which offers convenience and security. This trend will continue even beyond this pandemic and will drive investments in the payments space.”