Investment in Canadian fintech companies reached nearly US$1 billion in the first half of 2026, with funding accelerating in the second quarter as investors concentrated on companies with scale, specialized artificial intelligence capabilities and positions in emerging financial infrastructure.
Canadian fintechs attracted US$996.7 million across 47 deals in the first six months of the year, according to KPMG International's H1'26 Pulse of Fintech report, based on data compiled by PitchBook. That was broadly in line with the US$1 billion invested across 56 deals in the second half of 2025, but down more than 40 per cent from the US$1.7 billion invested across 82 deals in the first half of 2025.
The results suggest investors are becoming more selective about where they deploy capital in Canada's fintech sector.
"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, a partner in KPMG Canada's Banking and Capital Markets practice.
Investment increased sharply in the second quarter, reaching US$621.7 million across 23 deals, compared with US$375 million across 24 deals in the first quarter.
The largest transaction was a US$218.6-million Series E investment in online mortgage lender Nesto, which valued the company at US$1 billion. The financing included new investors La Caisse, Fidelity Investments Canada ULC, PICTON Investments and Endeavor Catalyst, along with existing investors including Portage, Diagram, NAventures, National Bank of Canada's corporate venture capital arm, Fonds de solidarité FTQ and Fondaction.
The Nesto transaction helped lift venture capital investment to US$398.2 million across 19 deals in the second quarter, up from US$94.6 million across 14 deals in the first three months of the year.
"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," Cunningham said.
Venture capital funding totalled US$492.9 million across 33 deals during the first half, while corporate venture capital investment totalled US$25 million across eight deals. Merger and acquisition activity reached US$37 million across 12 deals, while private equity and growth investments totalled US$130.6 million across two deals.
Artificial intelligence and machine learning were the most active fintech investment category, accounting for 19 investments in the first half.
KPMG said the activity reflects a shift toward more specialized uses of AI rather than broad experimentation with the technology.
"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," Cunningham said.
Digital asset-based fintechs were the second-most active vertical during the first half. Robinhood Markets Inc.'s US$168.4-million acquisition of Toronto-based WonderFi Technologies was the second-largest fintech transaction in Canada during the period.
The deal marked Robinhood's entry into Canada through WonderFi's regulated cryptoasset platforms Bitbuy and Coinsquare.
Andrew Mathias, a partner in KPMG's Deal Advisory practice, said regulated platforms with scale are expected to remain attractive to investors as changes to Canada's financial services infrastructure take effect.
"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," Mathias said.
Consumer-driven banking will allow consumers to share financial information securely with accredited fintechs, while the Real-Time Rail is intended to modernize Canada's payments system through real-time money movement and improved payment data.
"While regulation is often seen as a constraint, it might finally become a catalyst for fintech investment," Mathias said. "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," he added.
Globally, US$103 billion was invested across 2,098 fintech deals in the first half of 2026. The majority, US$81 billion, was invested in the United States across 933 deals.