Southeast Asian fintech growth hampered by funding woes

Almost three quarters believe they only have less than a year to raise funds.

Funding remains a key issue hampering the growth of fintech firms in Southeast Asia as half (52%) of startups expressed difficulty in finding sufficient funding and investors that will allow their business to grow and scale, according to EY. 

Fintech firms need adequate financing fuel particularly in growth-stage equity and capital to accelerate their business model as over 60% of firms expect their next funding round to be more than $1m.

“As with most start-ups, FinTech firms may find themselves limited by funding options. Venture capitalists and banks are often the first port of call for fund-seekers, although most will not take on the credit risk of companies with a track record of less than three years,” said Ernst & Young Advisory Pte. Ltd. managing partner Liew Nam Soon.

Almost half (45%) of respondents admitted to relying on self-funding but this poses the concern of what companies can do should their initial pool of capital run out. It thus comes as no surprise that 68% note that they only have a window of less than a year to plan and raise funds to support their businesses’ growth.

The survey revealed that startups believe that the government can help address this pain point through higher tax incentives for angel investors in early stage investment and the introduction of policy reforms that will facilitate employee hiring.

“Governments play a vital role in shaping a conducive FinTech ecosystem that helps to attract and develop the right talent pool, and promotes innovation and collaboration and healthy competition. The continued evolution of the FinTech ecosystem will help to drive growth and greater financial inclusion of Southeast Asia as a region,” said EY Asean Financial Services, Ernst & Young LLP managing partner Brian Thung.