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

KPMG | Aug 12, 2021

Total fintech investments in Canada 2018 2021 H1 - KPMG Report:  Canada attracts record $4.8 billion in fintech investment in H1’21: how high can it go by year end?

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.

See:  Accenture Report (Mar 2021): Collaborating to win in Canada’s fintech ecosystem

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

Highlights in the Americas

Attracts $51.4 billion in fintech investment, including record $31 million in VC

Fintech investment in the Americas reached $51.4 billion in H1’21, with VC investment accounting for $31 billion — shattering the previous annual high of $24 billion set in 2020. The continued innovations in financial technology, combined with the dramatic increase in use of digital offerings has made fintech one of the most active sectors of investment, both from a VC perspective and from an M&A standpoint. Key H1’21 highlights from the Americas include:

Payments hot across the Americas

The payments space was incredibly active in H1’21. Exits got a significant amount of attention in the US — with alternative lender Affirm raising $1.2 billion in its IPO and Deluxe acquiring First American Payments for $960 million.1 VC funding in the payments space was particularly notable in Latin America where Brazil-based Nubank raised $1.5 billion.

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Valuations driving unicorn births

Fintech valuations remained high in H1’21 as investors continued to see the space as attractive and well-performing. This likely drove the explosion of unicorn births in the first half of 2021. While the importance of unicorn status is waning in the US given its proliferation of unicorns, it is still a significant milestone elsewhere in the Americas. In H1’21, Canadian e-commerce company Clearco and ID verification firm Trulioo became unicorns, in addition to Mexico-based cryptocurrency platform Bitso.

Corporates getting into crypto space

During H1’21, a number of corporates in the US made big bets on cryptocurrencies, including Paypal — which acquired crypto-security firm Curv in H1’21 following its announcement of a partnership with Paxos in late 2020. Paypal ventures contributed to Paxos’s $300 million raise in H1’21.2 Facebook, through the Diem Association, also continued to move forward with its plans to launch a US dollar stablecoin before the end of the year.3

Consolidations in the B2B space

H1’21 saw a number of consolidations occurring in the B2B space, including Bill.com’s acquisition of Divvy. The B2B payments space is quite hot — and is expected to remain very attractive to investors given the amount of room it has to grow as companies across the Americas move from cheque-based payments to electronic payments. As companies look to scale and gain market share, more consolidations will likely occur.

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NCFA Jan 2018 resize - KPMG Report:  Canada attracts record $4.8 billion in fintech investment in H1’21: how high can it go by year end? The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org

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