FINTECH

FINTECH

ISRAEL’S FINTECH IS MOVING UP FAST

 

Israel’s Fintech industry has become a leader in financial innovation, thanks to a particular set of skills that include expertise in cross-over technologies like cybersecurity, big data analytics and AI. The industry is also powered by an active and diverse entrepreneurial Fintech community working in a dynamic and global perspective.

 

To understand the dynamics of Israel’s Fintech sector, let’s start by looking at the growth pattern. In 2012 there were only 159 Fintech companies. By 2017, that number had tripled to 475 companies – and by 2019 it had reached 529 companies. What contributed to this rapid expansion?

 

Six catalysts for growth

Growing competition in financial services – Recent years have seen the market expand in remarkable ways – far beyond traditional financial institutions. Because Israel’s Fintech ecosystem is B2B oriented, it has been quick to shape itself to these new opportunities.

 

Meeting the needs of the SMEs – Fintech entrepreneurs realized that Small-to-Medium Enterprises (SMEs) were often not fully served by suppliers like banks. So they moved in. Today, 45% of Israeli Fintech companies serve SMEs via the Cloud, through eCommerce channels and in online marketplaces.

 

Greater customer interaction – Many entrepreneurs have used their expertise in data collection and analysis to deliver greater value and increase the level of customer satisfaction. They have also become mobile-savvy. Around 30% of Israeli Fintech companies offer solutions that are accessed through a mobile app.

 

Harnessing technology – Israeli Fintech companies were early adopters of cloud computing, API (application programming interface) and AI techniques to develop highly accessible and lower-cost financial solutions.

 

Putting innovation into finance – In many cases, the core of a solution has come by applying a novel business or financial model. One example was to develop a new method of credit scoring by analyzing a borrower’s social network activity in addition to their cash flow.

 

Success that breeds further success – A number of global Fintech companies with Israeli roots have inspired a new generation of entrepreneurs. Borderfree was started in 1999 and acquired by Pitney Bowes in 2015. PB’s cofounder later established the global cross-border payments company Payoneer.

 

How is Israel’s Fintech organized?

Fintech in Israel is a large and diversified technology branch comprising seven sectors*.

 

The first three make up almost 60% of the sector:

  • Trading and Investing (22.8%)
  • Payments and Money Transfer (20.8%)
  • Enterprise Solutions (16.6%).

 

The next group adds a further 25%:

  • Anti-Fraud, Risk and Compliance (13.4%)
  • Insuretech (11.9%).

 

The last two subsectors are:

  • Lending and Financing (8.9%)
  • Personal Finance Management (5.9%).

 

* Start-Up Nation Central: Israeli FinTech Report 2019.

 

Successes in Israel’s Fintech

On the ‘macro’ level, 2019 was the best year for equity investments in Israeli Fintech. They reached $1.8 billion, representing 5% of all venture stage Fintech investments worldwide and double the amount raised in 2018.

 

On the individual level, 12 companies raised over $100 million in equity and attracted the over 50% of the sector’s total equity investments over the past five years. Heading the list was Lemonade ($480m), followed by BlueVine ($286m), Fundbox ($284m) and Payoneer ($282m).

 

The sector gets ongoing support from the Israeli government. It has promoted the Fintech-Cyber innovation lab, which accelerates Israeli Fintech and Cyber start-ups and encourages international investments in those fields. It is also establishing open banking standards so that Fintech companies can obtain access to bank data and so expand their customer base.

 

These are just a few of the insights into Israel’s Fintech activities. KEYZUNA is close to this industry. Let us help you, our Japanese visitors, to identify the most suitable Israeli innovators for your specific needs.

 

Sources:

Start-Up Nation Central: Israeli FinTech Reports 2018 

Start-Up Nation Central: Israeli FinTech Reports 2019 

https://blog.startupnationcentral.org/fintech/israeli-fintech-startups-financial-institutions/

 

ISRAEL’S POSITION IN CYBER SECURITY

 

The Israeli cyber security sector attracted more than $1 billion in private investments in 2018, a 22% increase over 2017. This sector has become the second richest cyber ecosystem globally after the USA.

 

As a small and exposed country, Israel has made massive investments in cyber preparedness to ensure that it doesn’t fall victim to its enemies’ intentions. The innovative drive to stay ahead of the evil-doers, supported by a rich start-up component, has been recognized by many nations. Israeli cyber know-how is now in high demand.

 

With its pioneering role in dealing with cyber threats, the industry operates across a wide spectrum. The categories defined by the Israel National Cyber Directorate (INCD) are:

 

Fraud, Identity and Access Management • Applications and Web Security • Network Security • End-Point Security • Intelligence /Governance, Risk Management, Compliance (GRC) • Cyber Security Services • Data Protection and Recovery • Mobile Security • Integrated Computer Solutions (ICS)/IoT Security • Cloud Security • Automotive Security • Medical Security.

 

Israel attributes its dominance in Cyber to many factors:

 

  1. The government acts as a coordinator – guiding and advising the interplay between itself, the military, businesses and universities. It is also a business catalyst.

 

  1. The military is a start-up incubator and accelerator. Its fames Unit 8200 attracts some of the best young innovators, who contribute first to the army’s protection and later become cyber workers.

 

  1. Israel invests greatly in human capital. Cyber is a study choice both at high school and university. There are six university research centers dedicated to cyber security.

 

  1. There is great encouragement to cross from one discipline to another and seek diversity. People condition themselves to see things from different angles and to reach beyond boundaries.

 

  1. The current cyber security strategy is focused on potential threats, not potential attackers. It relies on the layers of Robustness, Resilience and Defense, all working together.

 

In some areas such as civil aviation, hospitals and digital healthcare, the private sector is not reacting quickly enough. So the Israeli government, working through INCD, is taking the lead. INCD initiates widespread R&D efforts to find rapid and effective countermeasures.

 

Another challenge being picked up by INCD is that of malicious ‘influence campaigns’. How can nations prevent other nations and global organizations from interfering in their elections? The INCD ‘cyber breakthrough’ program supports ultra-high-risk private R&D projects geared towards these problems, but which could never get private VC backing. This is how ‘game-changing’ progress gets made.

 

These are just a few of the insights into Israel’s fascinating cyber industry. KEYZUNA is close to this industry. Let us help you, our Japanese visitors, to identify the most suitable Israeli innovators for your specific needs.

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