Fintech makes financial services more convenient, efficient, and accessible — just look at Borrowell’s free credit scores and Koho Financial’s cashback banking. No wonder investors shelled out nearly 7 billion USD in Canadian fintech. Toronto alone has over 1,200 fintech companies, one out of four city hubs for fintech in Canada, alongside Montreal, Calgary, and Vancouver.
But that investment came to a startling halt this past year, according to the latest report from KPMG.
In 2022, fintech investment fell a shocking 81 percent from over $7 billion in 2021 to a mere $1.3 billion in 2022. Ouch. On top of that, the number of investments fell from 217 to 169 in 2022.
Here are the 2022 fintech investment deals by industry:
- Crytoassets: 51
- Payments: 16
- RegTech: 15
- InsurTech: 12
- Proptech: 8
- Cybersecurity: 1
- WealthTech: 1
We recently saw a similarly conservative approach to venture capital investments this year. While general VC investing favoured more late-stage businesses, this year, fintech investments seemed to gravitate more to seed round deals, with 57 in 2022 (compared to 41 early-stage and 30 late-stage).
Still, despite these drops, fintech presents the potential for continued investment and success. KPMG financial services industry leader Geoff Rush sees this drop as predictable given 2021’s boom. He notes 2022 had more investments than 2020, which still indicates “attractive opportunities.”
Plus, the cryptoassets sector still has a “sustainable future” despite this year’s recent volatility and collapse of FTX. How? More regulations from the government, along with transparency and accountability from crypto companies.
A shift in growth strategy
KPMG Deal Advisory partner Georges Pigeon predicts similarly subdued deals and valuations into 2023, with a pickup toward Q4 2023. He also observes a priority shift from “sustainable profitability” over “growth at any cost,” which has encouraged companies to stretch out their cash longer.
Bottom line? Fintech isn’t going anywhere. We’re still seeing new innovations in the biz, like Canada’s latest fintech lenders making mortgages more accessible. But both companies and investors are applying a more conservative brush to their growth approach.
Interested in learning more? Check out KPMG’s full report.
