TLDR: Deal Volume in Canada’s FinTech Sector Fell by 50 Percent in 2023

According to a report from KPMG, investment in Canadian FinTech companies dropped by 30% in 2023 to $1.2 billion CAD ($920 million USD). Deal volume in the sector also fell by roughly half. The decline in investment and deal activity mirrors a global decline in FinTech investment, with deals falling by 65% and values by 73%. KPMG predicts that the next six to eight months will continue to be slow for FinTech investments, making it difficult for startups that require funding in the near term.

Crypto and blockchain ventures top deal flow charts

KPMG’s report found that investment in the crypto-assets and blockchain space in Canada exceeded investments in any other vertical for the second year in a row. The report tracked 31 deals in this sector in 2023, including LayerZero’s $120 million Series B financing. KPMG highlighted the investment in blockchain infrastructure as a sign of future growth potential if Canada adopts a central bank digital currency. The cryptocurrency sector has seen a resurgence in recent months, fueled by the price of Bitcoin rallying by over 120% in 2023 and the SEC’s approval of US-listed Bitcoin ETFs in January.

Rate reductions and open banking rules to energize ecosystem in 2024

KPMG’s report noted that venture capital-backed investments accounted for more than 75% of all deals in 2023. Late-stage and corporate venture capital investments comprised over 40% of all FinTech investments. KPMG predicts that investment activity in 2024 will remain sensitive to interest rates and should pick up once the Bank of Canada starts making cuts. Additionally, upcoming open banking legislation at the federal level could boost investor confidence in Canadian FinTech companies this year.