Canada
United States

Canada

Canadian financial institutions driven to reimagine the future

Total fintech investment activity (VC, PE and M&A) in Canada 2017–2020*

Source: Pulse of Fintech H1’20, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of 30 June 2020.

Fintech deals and investment in Canada dropped dramatically in H1’20, as deals became more difficult to complete due to COVID-19. The pandemic, however, also drove fintech interest as the use of digital technologies shot up significantly, both by consumers and by financial institutions working to enable their employees to work from home. This shift, which moved some digital agendas forward by years in a matter of weeks, is expected to continue to catalyze interest in fintech.

As banks and other Canadian financial institutions reimagine the future of their operations in a post-COVID world, it is likely that corporate VC funds will flow. VC investors in Canada will likely also increase their investments as they look to capitalize on the increasing interest in fintech.

In Canada, everyone is climbing out of the immediate COVID-19 exigencies and focusing on what the new normal will mean for things like distribution channels, digital, the need for cost reduction and what new models for their workforces will look like. And, of course, looking at the scenarios for the next 18 months around credit losses.

The financial services industry, including regulators and lawmakers, is going to remain focused on these immediate questions for a while. But, where there are fintechs that can help fill gaps that maybe weren’t noticed in the past around digital or payments or regtech solutions, deals will still get done. They just may take longer to consummate.

John Armstrong

Partner, National Financial Services Leader,KPMG in Canada

United States

US corporates embrace fintech as pace of disruption accelerates

Total fintech investment activity (VC, PE and M&A) in the US 2017–2020*

Source: Pulse of Fintech H1’20, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of 30 June 2020.

Corporate fintech investment in the US reached a record of US$2.4 billion in Q1’20, almost matching it again in Q2’20. Corporate investment remained high despite the uncertainty, due in part, to the predominantly strategic nature of the investments.

US corporates see fintechs as a way to augment their capabilities and support their business strategies, making the business case for investments strong even during a pandemic. The acceleration of digital trends and the business model disruption caused by COVID-19 will likely keep corporate investment high into H2’20 as less digitally-enabled corporates increase investments.

In the US, COVID-19 has put uncertainty into what valuations should be, so we’ll probably continue to see a dip until we get a better sense of the extent and timing of the recovery.

However, the mature fintechs, like those in the payments space, have already started to show signs of recovery in May and June compared to their performance in March and April. I think we’ll continue to see those fintechs performing well.

Robert Ruark

Principal, Financial Services Strategy and Fintech Leader,KPMG in the US