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Industry
Associations
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Startup Nation
Central
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The Floor
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FinTech Aviv
Overview
Israel has a strong culture of innovation bolstered by government support and a highly
educated workforce. The country has the largest number of startups per capita in the
world, around 1 startup for every 1,400people. Some of these startups have gone on to be
high-profile exits, including Waze, which sold for $1.3 billion, and Mobileye for $15.3
billion. The technology education imparted in army units has helped nurture entrepreneurs
in the country.
FinTech Ecosystem
FinTechs
As of August 28, 2018, Israel hosts 426 FinTechs, operating in diverse areas including
payments, trading and investing, lending and financing, anti-fraud and insurance, with
concentration in payment and trading and investing. There is a shift in the start-up
business model in the recent years as more and more companies are planning to
partner/collaborate with banks.
Israeli FinTechs are also often born with a global mindset at the start –due to the small
domestic market and concentrated nature of the local banking sector. This international-
first mindset is often attractive to multinational investors.
Global and local financial service providers have partnered with startups through
incubation and acceleration. Citibank and Barclays set up their innovation centers in 2011.
In March 2018, Deutsche Bank also announced plan to establish its technology center.
In April 2018, insurance company Menorah Mivtachim became a strategic partner with IBM
accelerator Alpha Zone, and is selecting advance-stage Israeli insurtech startups for a 20-
week acceleration program.
Regulators
The Bank of Israel, which supervises and regulates the banking system, recognized the
role of FinTechin increasing financial inclusion and efficiency, and has taken a range of
initiatives to encourage the development of FinTechin Israel.
At the end of 2016, the Banking Supervision Department under the BoIestablished a
dedicated division for technology and innovation. The division is working to lower
regulatory barriers that are delaying innovation, adjust risk management to a changing
environment, lead broad infrastructure projects (such as open banking and the Central
Credit Register.)
In June 2018, the BoIpublished a policy that regulates, clarifies and simplifies the process
of establishing a bank. The policy was determined while examining models and
publications of supervisory authorities around the world, including in the UK and Australia.
The Banking Supervision Department also established a Licensing and New Banks Unit,
which is intended—among its other functions—to guide the applicant through all stages of
the licensing process, examine requests for bank licenses and for permits to control a
banking corporation, and supervise the new bank after receipt of the license.
Israel
►Cybersecurity
►Blockchain
►AI
►Payment
►Alternate financing
F O C U S
Key takeaways
In August 2018, the BoI announced that it had begun a project to regulate an API standard
for open banking, with the aim to promote competition in the banking system. The project is
expected to be fully implemented by the Israeli banking system in 2020.
As of August 2018, the Bank of Israel in the process to establish and operate a system for
the sharing of credit data in Israel, which includes a Central Credit Register (CCR). The
CCR, which will enable the sharing of all customer information between the banks and
nonbank entities, allowing them to make better offers to customers.
The CCR is expected to help increase competition in the retail credit market, expand access
to credit, enable an expansion of the information available to credit providers wishing to
evaluate a customer’s credit risk level, and constitute an anonymous information base that
will serve the Bank of Israel in carrying out its functions, including for macroeconomic
research purposes and for the development of effective policy tools.
As of June 2018, the Ministry of Finance was formulating its "regulatory sandbox" aimed at
encouraging the Israeli FinTechindustry.
Investors
Israeli tech startups have been attracting investment from local and global investors alike. In
the first six months of 2018 more than $400 million was raised in 45 deals, exceeding
previous half-year investments by 33% and 45%, respectively. International attention is
increasing as international investors participated in 73% of investment deals in the first half
of 2018, up from 66% in 2017, and 60% from 2016.
The Israeli government provides financial support for tech companies through grants offered
by the Israel Innovation Authority. In July 2017, the Israeli Ministry of Finance announced a
tender for up to four government-backed technology growth funds. Tender winners will be
eligible for loss protection of up to $14 million, and for governmental credit guarantees of up
to $28 million. As part of the terms, the chosen funds will be required to invest a minimum of
30% in early-stage tech startups, for a minimum value of at least $113 million. The chosen
funds will be listed on the Tel Aviv Stock exchange.
Talent
Israel produces most of its High-Tech talent from compulsory military training for its men and
women. This training provides start-up like culture and gives a hands-on experience on
solving and managing projects.
This is a major source of talent for FinTech firms that rely on deep data science, cyber,
computer vision and NLP among others. Tel Aviv is known for their cybersecurity and AI
expertise and engineers from the Army are highly sought after by the tech industry.
Academic institutions are also developing FinTech talent. For example, the Gershon FinTech
Center of the Hebrew University was set up in 2018 with the aim to promote
entrepreneurship, advanced technologies such as machine learning and big data. Besides
offering offline and online courses in FinTech, it connects startups with mentors and
companies that seek their technology.
Israel issues work permits for foreigners whose skills and expertise complement those of the
local workforce. The base salary of a foreign expert must not fall below twice the average
salary in the labor market. Israeli companies are looking towards Eastern Europe to satisfy
their tech talent demand.
VC/PE in the region
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500 Startups
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83North
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Blumberg Capital
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Carmel Ventures
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Founders Fund
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Genesis Partners
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Horizons Ventures
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Iangels
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Intel Capital
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Khosla Ventures
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Kfar Saba
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Kreos Capital
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LionBird
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Magma Venture
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Nyca
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Techstars
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Sequoia Capital
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Spark Capital
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Startupbootcamp
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Viola Group
•The Israel Defense Forces (IDF) provides potential entrepreneurs with the
opportunity to develop a wide array of skills as well as a network.
•The Bank of Israel’s initiatives such as simplifying the process of
establishing a new bank, creating an API standard for open banking, and
creating the Central Credit Register are aimed to increase competition in
the financial services industry.
Varun Mittal
Global Emerging Markets
FinTech lead
varun.mittal@sg.ey.com
Contact us
www.ey.com/sg/FinTechHub
FinTech Hub