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Is Kazakhstan The Next Hot Spot for Fintech?

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Over the past years, venture capital (VC) funding in Caucasus and Central Asia (CCA) has increased substantially, growing by more than fivefold between 2018 and 2023, a new report produced by RISE Research in cooperation with EA Group and BGlobal Ventures, as well as Crunchbase, the Ministry of Digital Development, Innovation and Aerospace Industry of Kazakhstan, and KPMG Caucasus and Central Asia, says. Across the region, fintech has risen to prominence, becoming one of CCA’s investors preferred investment targets.

The “Venture Capital in Central Asia and the Caucasus 2023” report, released in March 2024, provides an overview of the VC landscape across the CCA region, outlining emerging trends and favored sectors in 2023.

According to the report, VC funding in CCA reached US$110 million in 2023, up by 450% from a mere US$20 million in 2018. This growth has been driven by the region’s expanding startup ecosystem, which saw its number of tech startups grow sixfold while the number of active VC investors in the region increased by nearly threefold during the period, data from the report show.

The VC ecosystem in the CCA region over the past five years, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

The VC ecosystem in the CCA region over the past five years, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

Fintech Kazakhstan on the Rise

In 2023, fintech emerged as one of the most prominent sectors in the region. Though the report doesn’t share specific amounts, data show that fintech was the top startup sector in most of the countries across the region, and most particularly in Kazakhstan and Uzbekistan, two of CCA’s largest VC markets.

In 2023, Kazakhstan secured US$80 million in VC funding, accounting for nearly 73% of all VC funding in CCA. Of that amount, about 40% was raised by fintech startups, making the segment the favorite of investors in the country.

VC deals in Kazakhstan by sectors, 2023, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

VC deals in Kazakhstan by sectors, 2023, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

Fintech Among Investor’s Favourite in Central Asia

A similar trend was observed in Uzbekistan where fintech startups secured a total of US$2.75 million through 12 deals in 2022 and 2023, making fintech the most prevalent among sectors in the domestic startup scene.

Uzbek startups secured a total of US$6.3 million in VC funding in 2023, a sum that makes Uzbekistan the third biggest market in CCA in terms of VC funding.

Uzbek VC deals by sectors, 2022-2023, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

Uzbek VC deals by sectors, 2022-2023, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

Fintech was also the preferred investment target in Tajikistan where the sector secured much of the US$3.1 million VC funding raised by the country’s tech startups in 2022 and 2023. Zypl.ai, an early-stage startup that develops a credit scoring tool powered by artificial intelligence, accounted for nearly all of disclosed VC investments in Tajikistan in 2022 and 2023, raising US$1.1 million in a pre-seed round in September 2022, and US$2 million in December 2023, the data show.

Tajikistani VC funding in 2022 and 2023, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

Tajikistani VC funding in 2022 and 2023, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

Georgia, the second largest VC market in CCA, also recorded strong interest in fintech last year, with some of the country’s biggest rounds being secured by companies in the sector. Pave Bank, a new digital bank, raised US$5.2 million in December 2023; Hexacore, a blockchain and Web 3.0 publisher, secured US$3.5 million in seed funding in August 2023; and CityPay.io, a digital currency payment solution, raised US$2 million in August 2023.

Together these four rounds secured US$10.7 million, representing nearly half of what was raised in Georgia last year.

Georgian VC funding in 2022 and 2023, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

Georgian VC funding in 2022 and 2023, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

VC funding in Caucasus and Central Asia

Data from the report reveal that Kazakhstan currently stands as the biggest market for VC funding in CCA and the most developed startup ecosystem. Since 2018, the country’s VC market has increased considerably, growing by 6.6 times to US$80 million in 2023. Meanwhile, average deal size grew 3.8 times to amount to US$1 million in 2023, an indication of the maturing of the Kazakh startup ecosystem.

However, the Kazakh tech startup ecosystem remains nascent with the bulk of 2023’s VC deals being pre-Seed (52%) and Seed (38%) rounds. Series A and B rounds accounted for 10% of the total number of deals in 2023 and Series C rounds were non-existent.

Kazakhstan VC volume, 2018 - 2023, US$ million, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

Kazakhstan VC volume, 2018 – 2023, US$ million, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024

The relatively low levels of investments in CCA imply that plenty opportunities still exist for investors alike.

A survey of more than 100 startups in the region and insights drawn from interviews with over 30 markets leaders reveal that industry participants are bullish on the growth prospect of VC funding in CCA.

40% of the investors polled expect significant growth in VC investment in 2024. This growth will be driven by the launch of new venture funds and the emergence of new business angels, with 60% of respondents expecting the investor pool in the region to grow significantly in 2024.

Investors cited fintech as the most promising sector for VC investments in CCA in the near future (30%), followed by e-commerce (15%), agrotech (15%) and medtech (10%).

Results of the CCA survey, Source: Venture Capital in Central Asia and the Caucasus 2023, Mar 2024
Source: fintechnews.sg

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Fintech

Central banks and the FinTech sector unite to change global payments space

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The BIS, along with seven leading central banks and a cohort of private financial firms, has embarked on an ambitious venture known as Project Agorá.

Named after the Greek word for “marketplace,” this initiative stands at the forefront of exploring the potential of tokenisation to significantly enhance the operational efficiency of the monetary system worldwide.

Central to this pioneering project are the Bank of France (on behalf of the Eurosystem), the Bank of Japan, the Bank of Korea, the Bank of Mexico, the Swiss National Bank, the Bank of England, and the Federal Reserve Bank of New York. These institutions have joined forces under the banner of Project Agorá, in partnership with an extensive assembly of private financial entities convened by the Institute of International Finance (IIF).

At the heart of Project Agorá is the pursuit of integrating tokenised commercial bank deposits with tokenised wholesale central bank money within a unified, public-private programmable financial platform. By harnessing the advanced capabilities of smart contracts and programmability, the project aspires to unlock new transactional possibilities that were previously infeasible or impractical, thereby fostering novel opportunities that could benefit businesses and consumers alike.

The collaborative effort seeks to address and surmount a variety of structural inefficiencies that currently plague cross-border payments. These challenges include disparate legal, regulatory, and technical standards; varying operating hours and time zones; and the heightened complexity associated with conducting financial integrity checks (such as anti-money laundering and customer verification procedures), which are often redundantly executed across multiple stages of a single transaction due to the involvement of several intermediaries.

As a beacon of experimental and exploratory projects, the BIS Innovation Hub is committed to delivering public goods to the global central banking community through initiatives like Project Agorá. In line with this mission, the BIS will soon issue a call for expressions of interest from private financial institutions eager to contribute to this ground-breaking project. The IIF will facilitate the involvement of private sector participants, extending an invitation to regulated financial institutions representing each of the seven aforementioned currencies to partake in this transformative endeavour.

Source: fintech.globa

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Fintech

TD Bank inks multi-year strategic partnership with Google Cloud

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TD Bank has inked a multi-year deal with Google Cloud as it looks to streamline the development and deployment of new products and services.

The deal will see the Canadian banking group integrate the vendor’s cloud services into a wider portion of its technology solutions portfolio, a move which TD expects will enable it “to respond quickly to changing customer expectations by rolling out new features, updates, or entirely new financial products at an accelerated pace”.

This marks an expansion of the already established relationship between TD Bank and Google Cloud after the group previously adopted the vendor’s Google Kubernetes Engine (GKE) for TD Securities Automated Trading (TDSAT), the Chicago-based subsidiary of its investment banking unit, TD Securities.

TDSAT uses GKE for process automation and quantitative modelling across fixed income markets, resulting in the development of a “data-driven research platform” capable of processing large research workloads in trading.

Dan Bosman, SVP and CIO of TD Securities, claims the infrastructure has so far supported TDSAT with “compute-intensive quantitative analysis” while expanding the subsidiary’s “trading volumes and portfolio size”.

TD’s new partnership with Google Cloud will see the group attempt to replicate the same level of success across its entire portfolio.

Source: fintechfutures.com

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MAS launches transformative platform to combat money laundering

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The MAS has unveiled Cosmic, an acronym for Collaborative Sharing of Money Laundering/Terrorism Financing Information and Cases, a new money laundering platform.

According to Business Times, launched on April 1, Cosmic stands out as the first centralised digital platform dedicated to combating money laundering, terrorism financing, and proliferation financing on a worldwide scale. This move follows the enactment of the Financial Services and Markets (Amendment) Act 2023, which, along with its subsidiary legislation, commenced on the same day to provide a solid legal foundation and safeguards for information sharing among financial institutions (FIs).

Cosmic enables participating FIs to exchange customer information when certain “red flags” indicate potential suspicious activities. The platform’s introduction is a testament to MAS’s commitment to ensuring the integrity of the financial sector, mandating participants to establish stringent policies and operational safeguards to maintain the confidentiality of the shared information. This strategic approach allows for the efficient exchange of intelligence on potential criminal activities while protecting legitimate customers.

Significantly, Cosmic was co-developed by MAS and six leading commercial banks in Singapore—OCBC, UOB, DBS, Citibank, HSBC, and Standard Chartered—which will serve as participant FIs during its initial phase. The initiative emphasizes voluntary information sharing focused on addressing key financial crime risks within the commercial banking sector, such as the misuse of legal persons, trade finance, and proliferation financing.

Loo Siew Yee, assistant managing director for policy, payments, and financial crime at MAS, highlighted that Cosmic enhances the existing collaboration between the industry and law enforcement authorities, fortifying Singapore’s reputation as a well-regulated and trusted financial hub. Similarly, Pua Xiao Wei of Citi Singapore and Loretta Yuen of OCBC have expressed their institutions’ support for Cosmic, noting its potential to ramp up anti-money laundering efforts and its significance as a development in the banking sector’s ability to combat financial crimes efficiently. DBS’ Lam Chee Kin also praised Cosmic as a “game changer,” emphasizing the careful balance between combating financial crime and ensuring legitimate customers’ access to financial services.

Source: fintech.global

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