The fintech industry in Southeast Asia recorded a fifth consecutive quarterly drop in startup investment as global socioeconomic and political factors take their toll. However, virtual asset service providers (VASPs) were the best performers, with Singapore dominating the region’s funding charts, a new report reveals.
Elsewhere, salary payments via digital platforms continue to struggle in Japan, accounting for a mere 3% of all payments.
VASPs shine as SEA startups struggle
In the first quarter of the year, SEA startups attracted $193 million in funding, the Southeast Asia FinTech Report by startup data platform Tracxn reveals. This marked a 66% drop year-on-year, compared to the $584 million they raised in Q1 last year. It’s also a 30% dip from Q4 2024 and marks the fifth consecutive quarter that the funding has dropped.
“The Southeast Asia FinTech ecosystem saw a sharp funding decline in Q1 2025, impacted by global funding challenges, investor caution, and market saturation,” Tracxn noted.
While fintech startup funding dipped, the overall tech sector in SEA surged 30% to $909 million in Q1, a separate report from Tracxn revealed. However, the figure was primarily down to the $600 million Singaporean data center firm Digital Edge raised in January.
Digital assets startups were the best funded, raising $97.5 million, which was a slight decline from Q4’s $101 million. Sygnum, a digital asset bank based in both Switzerland and Singapore, topped the charts with its $58 million Series C funding round in early January, which elevated it to unicorn status. It was the only fintech unicorn minted globally in what was a quiet quarter for the sector.
VOOX Exchange held the only other major funding round in SEA. The Singaporean bourse, which focuses on using AI to enhance the trading experience, raised $50 million in January from Pinnacle Capital to expand its infrastructure and strengthen security.
Another blockchain firm with notable fundraise in SEA was 129knots, a Singaporean asset tokenization firm that launched with a $10 million investment in January. The startup was incubated under a program led by the Singapore Economic Development Board (EDB) and counts IBM (NASDAQ: IBM) and McKinsey & Company as partners.
The sector also recorded one acquisition, with Titanlab scooping up blockchain intelligence platform Coinseeker in a deal worth $30 million.
Beyond the blockchain sector, alternative lending startups brought in $34.6 million, while investment tech attracted $34.3 million. Both sectors saw at least a 45% dip from Q1 2024.
Singapore remains Southeast Asia’s startup funding darling. In Q1, it attracted 74% of all investment, with Vietnam and Malaysia the other notable destinations.
Japan struggles with digital salary payments
In East Asia, a push by the Japanese government to spur salary payments via digital and mobile platforms has failed to take off, two years after launch.
A report by local daily The Mainichi revealed that less than 3% of Japanese employees had opted to receive their salaries digitally. Citing research by MMD Labo Inc., a Tokyo-based market research firm, the paper revealed that while 62% of the 20,000 respondents were aware of the initiative, it didn’t appeal to them.
Japan remains the most notoriously cash-heavy major economy. High trust in physical currency, an ageing population and low crime rates have all played a part, with 60% of all transactions made in cash. In contrast, only 4% of payments in neighboring China were in cash last year.
To spur digital payments, the Japanese government authorized the payment of salaries via digital platforms in April 2023. However, according to the report, most workers still prefer traditional methods. One in five respondents said they would consider switching if they could earn reward points.
It’s not just the workers; a report last October revealed that 89% of companies had no plans of switching to digital payments.
The digital push is strongest for companies with a sizable youthful workforce, the paper reports. One such company, Yoshinoya Co., a beef bowl chain operator with over 20,000 part-time employees, announced that starting this month, it would enable digital salary payments.
“Most of our part-time employees are young people. We introduced this system as part of benefits for young people who are familiar with payment apps. By being more convenient for them, we hope to encourage the retention of human resources,” a company spokesperson commented.
Watch: New age of payment solutions
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