Fintech Investing

Although investment in Canadian fintech companies fell in Q1, overall venture capital investment set a new record of $1 billion in the period.

Canadian fintech companies received $88 million in investment over the first quarter of 2018, representing a 60-percent decline, says a new report from PwC.

According to the report, total investment came across eight deals in the quarter as compared to seven in Q4 2017.

Total investment in Canada in the first quarter of 2018 was over $1 billion, which is a 52-percent increase over the last quarter. A total of 105 deals were signed as compared to 81 in the previous quarter, representing a 30-percent increase.

Despite the decrease in investment for Canadian fintech companies in Q1, the $1 billion in total investment represents a new record in venture capital funding, said Chris Dulny, national technology industry leader at PwC Canada.

“With a 52 percent increase in funding from last quarter … 2018 is off to a great start,” Dulny added.

The report notes that a major deal of over $130 million contributed to a $217-million investment in Q4 2017. For Q1 2018, a notable deal in the sector was the $51-million in investment Wealthsimple.

Wealthsimple is a Toronto-based online investment management service that has $1.9 billion in assets under management.

Many of the deals in Q1 happened in Toronto, which saw $321 million worth of investment in 38 deals. It was followed by Vancouver, which saw $103 million invested in 20 deals. In terms of investment, Montreal led the cities with over $399 million worth of investment in 16 deals.

Investor takeaway

Despite the fact that investment in the fintech sector saw a decline, it should be noted that the EY FinTech Adoption Index indicates that the fintech adoption rate will increase in Canada.

Data from Statista also shows that transaction value in Canada is expected to rise from $57.34 million in 2018 to $91.79 by 2022.

Additionally, the federal government is expected to assist the industry. It was reported by the Financial Post that Ottawa is poised to open the door for banks to invest in fintech firms that aren’t strictly in the business of financial services.

Traditional banks like Royal Bank of Canada (TSX:RY) also understand the risk of being pushed to sidelines in age of social media. RBC told shareholders that technology continues to reshape the financial services landscape as more consumers do their banking online or via smartphone.

“As these technology players realize their digital dividend there is a risk that our visibility with clients will diminish in the networked economies — or ecosystems — of the future,” David McKay, RBC’s chief executive, told shareholders at the bank’s annual meeting in April.

With Mogo (TSX:MOGO) recently announcing a 600,000-member milestone and other companies like Versapay (TSXV:VPY) and Mobi724 Global Solutions (CSE:MOS) buzzing with activity, the future of this sector in Canada looks promising.

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Securities Disclosure: I, Bala Yogesh, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence. 



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