Canadian fintech investment falls as larger deals dominate

Canadian fintech investment reached USD $996.7 million in the first half of 2026 across 47 deals, according to KPMG data compiled by PitchBook.

The market was broadly steady compared with the second half of 2025, when Canadian fintechs attracted about USD $1 billion across 56 deals. Year on year, however, activity fell sharply from USD $1.7 billion across 82 deals in the first half of 2025, leaving investment down by more than 40 per cent.

A second-quarter rebound drove much of the period's momentum. Investment rose to USD $621.7 million in Q2 from USD $375 million in Q1, even though the number of transactions barely changed, at 23 deals in the second quarter versus 24 in the first.

That suggests investors are writing larger cheques to a smaller group of companies. Venture capital funding reached USD $492.9 million across 33 deals in the first half, with Q2 contributing USD $398.2 million across 19 deals after a much slower opening quarter of USD $94.6 million across 14 deals.

Corporate venture capital accounted for USD $25 million across eight deals. Merger and acquisition activity totalled USD $37 million across 12 deals, while private equity and growth investments contributed USD $130.6 million across two deals.

The largest transaction was a USD $218.6 million Series E round for online mortgage lender Nesto, valuing the business at USD $1 billion. Investors included La Caisse, Fidelity Investments Canada ULC, PICTON Investments and Endeavor Catalyst, alongside existing backers Portage, Diagram, NAventures, Fonds de solidarité FTQ and Fondaction.

Nesto's financing helped lift second-quarter venture totals and stood out as one of the clearest signs that capital remains available for larger fintechs with established positions. Rather than backing a broad range of early-stage companies, investors appear to be concentrating on firms with scale, clearer economics and assets that could gain value as Canada's financial plumbing changes.

"Canadian fintech has entered a selective maturation phase, with investors going after fewer deals but applying more scrutiny to their investments. They are being more discerning and going after fintechs that have scale, specialized AI capabilities and that are competitively positioned to take advantage of upcoming reforms to Canada's financial services industry," said Dubie Cunningham, Partner, Banking and Capital Markets, KPMG Canada.

AI focus

Artificial intelligence and machine learning was the busiest fintech vertical in Canada during the first half, drawing 19 investments, more than any other segment. Digital assets and cryptoassets followed with 12 investments, while proptech recorded eight and payments six. Insurtech, cybersecurity and regtech accounted for a smaller share of deal activity.

By deal type, early-stage venture capital led with 19 transactions, ahead of 11 M&A deals and 10 late-stage venture capital financings. Seed rounds accounted for eight transactions, while angel investments and private equity growth or expansion deals each made up a smaller share of the market.

Cunningham said AI investing within financial technology is becoming more targeted rather than remaining a broad theme. Investors are backing companies that apply the technology to specific financial tasks instead of treating AI as a standalone attraction.

"Canadian fintechs are attracting capital not simply because they are innovative, but because they provide technology, customers, licences or regulated platforms that can accelerate expansion. While previous waves of fintech investment rewarded digital access and growth, this current wave is rewarding specialized intelligence and demonstrable economics," said Cunningham.

She also pointed to narrowing investor preferences within AI-led fintech. "Fintech investors aren't investing in AI for AI's sake - they're being strategic. Capital is flowing to fintechs that are using AI to solve a specific problem. The fintechs that are leveraging AI to make deposit-taking, lending and payment processing faster and more efficient are creating significant value; those are the types of fintechs where we see investment dollars going over the next year to 18 months," said Cunningham.

Regulatory shift

Digital asset businesses remained an important destination for capital in the first half, helped by Robinhood Markets' USD $168.4 million acquisition of Toronto-based WonderFi Technologies. The transaction marked Robinhood's move into Canada through WonderFi's regulated cryptoasset platforms Bitbuy and Coinsquare.

The emphasis on regulated businesses reflects a wider market shift as investors assess how policy changes could alter the economics of financial services. Two reforms stand out: the Consumer-Driven Banking Act and the implementation of the Real-Time Rail payments system.

Consumer-driven banking is expected to let consumers share financial information securely with accredited fintechs. The Real-Time Rail is intended to modernise the country's payments infrastructure by enabling instant movement of money and richer payment data.

Andrew Mathias, Partner, Deal Advisory, KPMG, said those reforms could create a more supportive environment for fintech investment by lowering barriers that have traditionally favoured large incumbents.

"Consumer-Driven Banking and the Real-Time Rail are opening up the infrastructure that fintechs need to compete, and these regulatory reforms could materially alter fintech economics and create conditions for a new period of competition in financial services," said Mathias.

He added that regulation may begin to support, rather than restrain, dealmaking and competition in the sector.

"While regulation is often seen as a constraint, it might finally become a catalyst for fintech investment," said Mathias. "Access to secure data-sharing systems and modern payment infrastructure will lower the cost of new services, enable new payment and account-aggregation products, reduce fintech dependence on incumbent institutions, increase partnership and acquisition opportunities and put pressure on established banks and larger software providers to differentiate. We expect the result will be more competition and consolidation for Canadian fintechs over the next year to 18 months."

Globally, fintech investment totalled USD $103 billion across 2,098 deals in the first half, with USD $81 billion concentrated in the US across 933 deals.