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Business trends

Asia fintech leads global funding as Alibaba and Baidu wallets thrive

Sector raised $30bn last year, nearly double North America tally

Ant Financial, which operates the Chinese mobile payment platform Alipay, raised $14 billion from investors last year.

TOKYO -- Asian financial technology companies raised $29.8 billion in 2018, almost twice as much as their North American counterparts, with investors looking to the region as the vanguard in innovative payment services.

About 54% of the world's $55.3 billion in fintech investments last year went to the Asia-Pacific, according to data released on Feb. 25 by U.S. consulting firm Accenture, with China alone accounting for 46% of the total.

With Asia's financial infrastructure not yet fully mature, the continent is bubbling with demand for quick and easy ways to transfer money, and services catering to that need are proliferating rapidly. The surge in fintech investment relative to advanced economies reflects the recognition that markets like China are attracting the cutting edge of the field.

Ant Financial, the digital payments arm of online mall operator Alibaba Group Holding, greatly boosted China's share with a single $14 billion round of fundraising. Investors included Singapore's sovereign wealth fund managers Temasek and GIC, as well as Malaysian counterpart Khazanah Nasional and the Canada Pension Plan Investment Board.

China also is home to the second- and third-biggest fundraisers: $4.3 billion went to Du Xiaoman Financial, which is linked to web search provider Baidu, while Lu.com or Lufax, an online lending operator backed by Ping An Insurance Group, received $1.3 billion.

The value per investment deal in Asian fintech companies is growing, noted Takafumi Murakami, managing director of Accenture's Japanese strategy consulting office. "It's not just startups" receiving cash, he added, citing an increase in cases of "somewhat large companies securing growth funding."

Beyond seeking growth prospects, investors poured more funds into Asian businesses as part of an effort to introduce to developed economies the innovative financial services that are spreading through the developing world.

Vested interests of entrenched financial institutions are not as prevalent in emerging markets as in advanced economies. Lighter regulations also contribute to conditions that have allowed fintech to flourish there, fostering reverse innovation, in which advances honed in emerging markets then spread to developed ones.

Japanese tech and investment giant SoftBank Group provides an example of this trend. The company's nearly $100 billion Vision Fund took a stake in 2017 in India's top mobile-payments provider Paytm, and thereafter a joint venture of SoftBank and Yahoo Japan called PayPay incorporated Paytm's technology in QR code-based payments.

Though Japan pales next to China in terms of total fintech investment, it has staged enormous growth, with the value of investments there more than quintupling on the year to exceed $500 million. Relatively large-scale deals, such as a 6.6 billion yen ($60 million) infusion for Tokyo-based mobile payment provider Origami, boosted growth overall. Japan's established financial players are increasingly seeking tie-ups with fintech newcomers, and regulations are gradually loosening.

Japan's "fintech investments will likely continue to accelerate," Murakami said, driven by public-private efforts to spur innovation.

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