Canada
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Canada

Canada attracts record $4.8 billion in fintech investment in H1’21: how high can it go by year end?

Total fintech investment activity (VC, PE and M&A) in Canada 2018–2021*

Source: Pulse of Fintech H1'21, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of 30 June 2021.

Total fintech investment in Canada skyrocketed to $4.8 billion in the first half of the year, already surpassing the previous annual record, set in 2017.

Canada saw robust M&A deal value in H1’21, drive primarily by Nasdaq’s acquisition of cybersecurity firm Verafin for $2.7 billion, and a number of smaller M&A deals, including the $265 billion acquisition of PayBright by Affirm for $265 million and the $113 million acquisition of Flexiti by Curo.1

Canada is attracting larger VC deals as fintech startups mature, evidenced by Wealthsimple’s $600 million raise and Fraction Technologies’ $220 million raise in H1’21.

Corporate interest and investment in fintech continued to diversify, both to accelerate internal capabilities and to support others; in H1’21, RBC launched RBCx — a platform aimed at providing holistic financial and entrepreneur support services to technology startups.2

Fintech investment is expected to remain strong in Canada, particularly in AI-driven solutions, payments, and crypto.

As a result of COVID-19, many if not most financial institutions really had to accelerate their digital capabilities. To do this, many recognized that they could get some of those capabilities more quickly and efficiently by partnering with fintechs. This realization, combined with Canada’s strong and maturing fintech ecosystem has helped drive the strong uptick in fintech investment here.

John Armstrong

Partner, National Financial Services Leader,KPMG in Canada

United States

VC investment in the US surges to over $25 billion

Total fintech investment activity (VC, PE and M&A) in the US 2018–2021*

Source: Pulse of Fintech H1'21, Global Analysis of Investment in Fintech, KPMG International (data provided by PitchBook), *as of 30 June 2021.

US VC investment in fintech surged past 2020’s peak high of $22 billion with six months left in the year, led by the $3.4 billion raise by Robinhood, a $600 million raise by Stripe, and $500 million raises by Better, ServiceTitan, and DailyPay.

The maturation of the US fintech sector was evident in the robust exit activity in H2’21, including Affirm’s successful IPO, the direct listing of Coinbase, the SPAC merger of SoFi with Social Capital Hedosophia Holdings Corp. V, and the SPAC merger of insurtech Clover Health with Social Capital Hedosophia Holdings Corp. III.

Payments M&A was a hot ticket in the US as companies looked to gain breadth and market share. In H1’21, Deluxe acquired First American Payments by Deluxe, Repay acquired BillingTree, and Bill.com acquired Divvy.

Fintech investment in the US will likely remain robust in H2’21, particularly in payments, wealthtech, and crypto; interest in lending could also open up as consumers look to travel and spend more post-pandemic.

The market is definitely picking the winners now, with the bigger and more established companies growing and having an easier time raising money than others. That said, innovative companies will continue to get funding. There’s still a lot of opportunity for companies looking at aspects of financial services differently — like Pipe, which raised $250 million in H2’21 to support its unique approach to working capital financing for merchants.

Robert Ruark

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