TORONTO — Investment in Canadian fintech companies plunged in the first half of the year as valuations fell to levels not seen since the beginning of the pandemic, says a report by KPMG in Canada.
Fintech investment in Canada, including venture capital, private equity and merger and acquisition activity, totalled US$353.7 million across 57 deals in the first six months of 2023.
The result was down from a total of $1.09 billion across 87 deals in the second half of 2022 and US$834.1 million across 109 deals in the first half of last year, according to data compiled by PitchBook for KPMG in Canada.
The report said the first half of 2023 was one of the weakest for valuations since the first half of 2020.
That was in line with the challenges faced in the global fintech market during the first half of the year. Investment dropped to US$52.4 billion across 2,153 deals from US$63.2 billion across 2,885 deals in the second half of 2022, according to KPMG international's latest bi-annual report.
Geoff Rush, partner and national industry leader for financial services at KPMG in Canada, said the decline in investment is the continuation of a downward trend that started last year.
"Investors are still quite concerned about the state of the global economy, with fears of a recession, elevated inflation and interest rates continuing to put a significant strain on valuations, and that's causing them to pause and reflect on their current investments and strategies," said Rush in a press release.
"Geopolitical concerns and the failure of several banks in recent months are also playing into investors' decisions."
The report said that in the first quarter, investment in Canadian fintech totalled US$297.3 million across 30 deals. That fell more than five-fold to US$56.5 million across 27 deals in the second quarter, marking one of the weakest quarters for Canadian fintech valuations since the fall of 2016.
"While investment will continue to be weak in the second half, we will likely see pockets of activity in areas like blockchain, artificial intelligence and machine learning," said Rush.
"There are a lot of financial services companies that rely significantly on technology and are looking to adopt more emerging technologies such as generative AI, so that should bode well for the fintech space in the near to long-term."
This report by The Canadian Press was first published Aug. 17, 2023.
The Canadian Press
