Canadian fintechs poised for further growth and investment in 2025
TORONTO, Feb. 18, 2025 /CNW/ – Investment in Canadian fintechs remained robust in 2024 despite a global drop in investment, KPMG International’s H2’24 Pulse of Fintech report shows.
A record US$9.5 billion was invested across 121 fintech deals last year, compared to US$1.1 billion invested a year earlier across 129 deals, according to data compiled by PitchBook. One large investment accounted for two-thirds of last year’s total – the US$6.3 billion take-private deal for Montreal-based Nuvei – the largest deal in Canada and second largest globally. A US$1 billion private equity investment into Montreal’s Plusgrade also helped boost last year’s total.
Stripping out the Nuvei and Plusgrade deals, total investment in Canadian fintechs – including venture capital, private equity and mergers and acquisitions – totalled US$2.2 billion last year, nearly double the year prior, and higher than the US$1.4 billion invested in 2022. That’s despite a drop in deal volume in the last six months of the year – with 45 deals in H2 compared to 76 in H1.
“Canada’s fintech sector is punching above its weight globally, with strong interest from venture capital and private equity investors – significant achievement in a year where global investment was weak,” says Dubie Cunningham, a partner in KPMG in Canada’s Banking and Capital Markets Practice who leads technology transformation.
Ms. Cunningham notes five deals closed at US$140 million or more last year – four of which were private equity buyouts. “It’s clear that private equity firms see established Canadian fintechs as keys to their growth strategies, and we believe this trend is likely to continue this year. With a strong pipeline of startups, growth-stage companies and near-exit-ready players, investment in Canadian fintech in 2025 looks promising,” she adds.
Venture capital-backed deals
Venture capital investors poured more money into Canadian fintechs last year, investing a total of US$1.09 billion across 90 deals, compared to US$737.8 million invested across 103 deals in 2023.
In the second half of the year, venture capitalists invested US$744.9 million across 33 deals, compared to $340.5 million across 57 deals in the first half.
The three largest VC-backed investments last year included Neo Financial’s US$260 million Series D funding, led by a number of high-profile tech founders and entrepreneurs; a US$210 million convertible note financing round into Blockstream by Fulgur Ventures; and Koho’s US$140 million financing led by PROPELR Growth as well as Rockefeller Capital, Drive Capital, TTV, and BDC.
Corporate venture-capital backed investments totalled US$24 million across 19 deals last year, and mergers and acquisitions accounted for US$8.4 billion across 27 deals (including Nuvei).
Fintech investment trends in 2025
Georges Pigeon, a partner in KPMG in Canada’s Deal Advisory practice in Montreal, expects fintech investment activity to increase this year, with an uptick in go-private deals and fintechs acquiring traditional financial services providers.
“We’re seeing some publicly-traded fintechs contemplating privatization because it’s easier to manage growth without the regulatory burden of public markets. Also, the lofty valuations of 2021 have come down, and that’s proving difficult for fintechs that went public around that time, so they might be looking at the private market again,” Mr. Pigeon said.
“We’re also seeing more transactions where fintechs are buying incumbent players because they see it as an easier way to replace their tech stack, or they see a path to replacing the tech stack. We expect to see continued activity in these types of transactions,” he adds.
Deal type/stage
Vertical
32 late stage VC
34 cryptoasset/blockchain
27 early stage VC
19 AI/machine learning
26 seed round
14 payments
14 mergers and/or acquisitions
9 regtech
13 buyout/LBO
8 insurtech
5 angel investments
6 proptech
4 PE growth/expansion
3 wealthtech
28 other
Outlook for fintech sub-segments
For the third year in a row, the largest number of fintech investments was in the cryptoasset and blockchain vertical (34 deals in total). Fintechs in artificial intelligence (AI) and machine learning (ML) also drew investors with 19 deals, followed by the payments space, which garnered 14 investments.
Mr. Pigeon expects to see continued interest in those areas in 2025 – especially in AI and ML – but says investors will be more discerning about where they invest.
“Investors have capital to deploy in Canadian fintech, but fintechs will need to have a very strong value proposition to get funding,” he says. “The fintechs that can demonstrate an ability to solve a problem for financial institutions and their legacy technology, that can acquire and retain clients, and that report decent profits will be more attractive to investors,” he adds.
Ms. Cunningham agrees investors will be more selective in 2025 and expects fintech valuations to increase. She also says regtech will be a vertical to watch in 2025 because of increasingly complex and evolving regulations around anti-money laundering and environmental, social and governance factors.
“Canada’s fintech ecosystem will see a market shift towards regulatory tech and ESG in 2025,” she says. “Other sub-segments such as neo-banks and insurtechs that continue to expand their product offerings will see growth as well. Overall, the market is well-positioned for strength this year, with valuations likely trending upward.”
About KPMG in Canada
KPMG LLP, a limited liability partnership, is a full-service Audit, Tax and Advisory firm owned and operated by Canadians. For over 150 years, our professionals have provided consulting, accounting, auditing, and tax services to Canadians, inspiring confidence, empowering change, and driving innovation. Guided by our core values of Integrity, Excellence, Courage, Together, For Better, KPMG employs more than 10,000 people in over 40 locations across Canada, serving private- and public-sector clients. KPMG is consistently ranked one of Canada’s top employers and one of the best places to work in the country.
The firm is established under the laws of Ontario and is a member of KPMG’s global organization of independent member firms affiliated with KPMG International, a private English company limited by guarantee. Each KPMG firm is a legally distinct and separate entity and describes itself as such. For more information, see kpmg.com/ca
For media inquiries:
Roula Meditskos
National Communications and Media Relations
KPMG in Canada
(416) 549-7982
rmeditskos@kpmg.ca
SOURCE KPMG LLP
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