Tech

Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

The U.S. is about to lose its dominance in financial technology.

While the world's most powerful nation continues to hold great influence over both the financial and technology sectors, combining the two will be the domain of Asia within the next few years.

Data from research consultancy CB Insights show that while North America (chiefly the U.S.) still does more venture-capital-backed fintech funding deals than either Europe or Asia, momentum is against it. Thanks to a few marquee rounds, such as a SoftBank Group Corp.-led $1.4 billion investment in Indian payments company Paytm, Asia retook the crown by funding amount last quarter.

Doing Deals
Asia is catching up in attracting VC funding as both the U.S. and Europe decline
Source: CB Insights

Asia is already home to the world's biggest fintech company by valuation -- Chinese peer-to-peer lender Lufax -- and has a handful of other unicorns in its stable.

Unicorn Husbandry
Three of the world's five-biggest fintech startups by valuation hail from Asia
Source: CB Insights

One of the most important data points from CB Insights' research is the preponderance of early-stage fintech firms attracting funding. More than two-thirds of all VC-backed deals in Asia were at the seed/angel or Series A round stage, versus 52 percent in the U.S. That shows a very strong pipeline of new ideas, and new startups that will draw more money in coming years, breeding more unicorns. 

Sowing the Seeds
More than two-thirds of all VC-backed Asian fintech deals last quarter were into the earliest rounds of startup funding
Source: CB Insights

Many are developing blockchain or bitcoin-related ventures, including digital wallets and distributed ledgers. And remember, beyond the data collated by CB Insights is the vast investment flowing into initial coin offerings, funded not by direct cash but by cryptocurrencies such as ethereum.

Some of that money has come from existing funds circulating in the crypto-economy, but a rise in the price of ethereum and bitcoin against the U.S. dollar shows a lot is from fiat currencies.

Crypto Craze
Funding of blockchain and bitcoin startups continues to rise
Source: CB Insights
Note: R3 is a distributed database startup that closed a funding round in May.

While this crypto boom will end, and badly, what's left over will be a solid infrastructure that will become embedded in many facets of the finance industry. Thanks to measures taken in Singapore to encourage blockchain companies, along with the relatively laissez-faire approach taken by Chinese regulators and founders (for now), and the existing bitcoin infrastructure, Asia has become a hub for blockchain business development.

All this means that while New York remains host to Wall Street and its bankers, a new digital Wall Street is being created in Asia. And that's where the next wave of technology and banking talent will flock.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editor responsible for this story:
Katrina Nicholas at knicholas2@bloomberg.net