Fintech investments are subject to ongoing market volatility and an uncertain economic outlook. In Canada, overall investment dropped by over 50% compared to 2021. That is not a good outlook, although other regions will likely record similar trends.
Fintech Investment Crumbles
Due to ongoing economic uncertainty and other macroeconomic developments, investors have become more risk-averse. Not entirely surprising, as putting money anywhere carries significant risks today. Money begets money in most circumstances, but this time is very different. Everything loses value in front of people’s eyes, and there does not appear to be any improvement in sight.
In Canada, things look very bleak for fintech investments in early 2022. A KPMG report confirms a total of $810 million has been invested into the industry during H1 2022. That seems like a good amount, but H2 2021 yielded $1.9 billion. A decline of over 50% is rather problematic, but things get worse. Comparing H1 2021 to H1 2021 shows a decline from $5.4 billion to $810 million. Things look pretty bleak for Canadian fintech investment, but things can still turn around.
KPMG Canada National Industry Leader of Financial Services Geoff Rush adds:
“The market downturn and ensuing lower tech valuations caused investors to hit the ‘pause button’ over the last few months, but with so much investment flowing into fintech last year, we see it as a re-balancing of expectations, or a sector reset if you will. We expect fintech to continue to draw interest in the second half of the year, but investors will be more selective about where they deploy capital.”
One intriguing observation is how H1 2022 saw 85 fintech investment deals in Canada. Over one-third of those deals involve cryptocurrency firms, including payments and regtech providers. Moreover, 65 of the 85 deals relied on VC investments, leaving little room for anything else. It will be intriguing to see if things improve in H2 2022, as there are still many fintech investment opportunities ahead.