KPMG International has released its latest Pulse of FinTech report, which examines investment trends, issues, and challenges in the global FinTech sector during the first half of 2018.
The report found that Canada’s FinTech sector saw a high volume of deals in the first half of the year; however, the value of those deals declined compared to last year.
“Our country is riding the wave of digital disruption that is changing the financial services ecosystem globally.”
Specifically, Canada saw $263 million (all numbers USD) invested in FinTech deals across venture capital and mergers and acquisitions in the first half of 2018, which is less than the $510 million invested in the second half of 2017. The report points to major FinTech deals that took place earlier this year, such as Wealthsimple’s $65 million raise in February.
The report also found that there were over 50 deals in the first half of 2018 alone, almost as many as the total deal amount in all of 2017.
“Our country is riding the wave of digital disruption that is changing the financial services ecosystem globally,” said John Armstrong, national industry leader for financial services at KPMG in Canada. “Toronto and Montréal, in particular, have emerged as strong FinTech hubs and top global destinations for financial and intellectual capital. As financial services regulation in Canada continues to evolve, we are bound to see an even greater increase in activity in the space.”
When it comes to what factors are driving Canada’s FinTech sector, the report noted that artificial intelligence was a dominant focus area for investors in Canadian FinTech during the first half of 2018. The report indicated that AI continues to be a main focus area as banks seek to acquire companies in the AI space, such as TD Bank Group, which acquired the predictive analytics firm Layer 6 in January 2018.
“Canada is seen as a global leader in AI innovation with highly regarded specialists in Toronto, Montreal and Edmonton attracting significant investments to those cities,” the report reads. “We continue to see banks acquire companies in the AI space, in part as a talent grab in order to fuel their own innovation activities.”
“We continue to see banks acquire companies in the AI space, in part as a talent grab in order to fuel their own innovation activities.”
As the Canadian FinTech sector continues to evolve, KPMG’s report indicated how investors, banks, and FinTechs are preparing for further modernization in payments and open banking. The report noted that the federal government is currently updating the Bank Act, with plans to permit some level of open banking. Payments Canada is also working on a payments modernization initiative, which aims to improve critical infrastructure and create a real-time payments rail.
“The payments modernization initiative and the update to the federal Bank Act will unlock new opportunities for FinTech players in the payments space and around open banking,” said Armstrong. “While both initiatives are still in process, investors recognize that change is coming and are positioning themselves accordingly.”
KPMG developed the Pulse of FinTech report by using PitchBook to access data related to FinTech fundraising, deals, and exits in several countries. View the full Pulse of FinTech report here.
